This month’s recommended read is based on an article from Reuters.com that discusses the ramifications of the port bans on Qatar. You can read the original article here.
Since Qatar joined OPEC in 1961, it has enjoyed the benefits of exporting crude oil and natural gas. Without the sale of its natural resources, Qatar could spiral into a deep economic recession. If a shipping ban can stay imposed on every border, the financial future of the country is in question. The ever-increasing worldwide supply of oil and questionable OPEC production cuts offer plenty of opportunities for other nations to step forward and sell their oil and natural gas. So, what does that mean for oil prices?
In the near-term, this could spark a rally. However, if a large supply of oil is offered to fill the void, there could be another large sell-off before the end of summer. (Which may already be in progress). There is also some potential that Turkey may escalate the situation. Back in April of 2016, the two countries signed an agreement that would allow Turkey to build a military base in Qatar for the emirate’s defense to station troops. The recently proposed amendment aimed to redefine paramilitary police and coast guard under Turkish law. At a gathering in the Turkish capital, Ankara, Erdogan said, “I’d like to say that we don’t find sanctions against Qatar right.” The ruling party asked parliament to fast-track the amendment leaving the question of whether or not Turkey’s move can be considered aggressive. With so many moving parts in the region, the future price movements of crude oil will remain shrouded in a veil of uncertainty.