The U.S. trade war against China and sanctions regime is contributing to instability in the global oil market, Russian Energy Minister Alexander Novak told CNBC on Wednesday.
"We see a lot of uncertainty here. There's the trade wars that you mentioned and, of course, the sanctions policy by the U.S. is also not contributing to stability," Novak said, speaking to CNBC's Geoff Cutmore at the Eastern Economic Forum (EEF) in Vladivostok, Russia.
Novak said geopolitical uncertainties such as the U.S.' decision to impose a massive package of tariffs on Chinese imports, as well as its sanctions on Russia and those coming up on Iran, could prompt oil prices to rise modestly.
"As for this geopolitical premium, I would say that our estimates say $5-$6 (could be added to the price of a barrel of oil) at least," he said.
Benchmark Brent crude futures are currently trading at $79.21 while U.S. West Texas Intermediate (WTI) futures are at $69.82 per barrel.
"We have quite a clear picture today that there's not only the supply and demand dynamics but more the economic dynamics that determine the oil price, but you have to add the factor of uncertainty here which also governs the price a lot," he said.
Novak's comments come as oil market focus shifts away from a successful 2016 deal between OPEC and Russia (and other non-OPEC producers) to curb output in order to support prices, to current threats to the global oil supply.
Forthcoming U.S. sanctions on Iran's oil sector, coming into effect in November, are seen as the biggest disruptive force with oil market analysts predicting that Iran's daily production could fall by as much as 1.5 million barrels a day.
Novak's prediction that $5-$6 could be added to the price of a barrel of oil is conservative with many oil market watchers predicting prices per barrel could rise to $90 or even $100 per barrel, particularly when sanctions against Iran take hold.
The global oil supply could also be vulnerable to economic and political turmoil, and accompanying supply disruptions, in other major oil producing countries, namely Venezuela, Iraq, Nigeria and Libya.
With sanctions looming on Iran, Saudi Arabia, OPEC's de facto leader, and Russia have pledged to step in to the breach and pump more oil (much to the consternation of Iran, which has said no other OPEC can take over its share of oil exports) but how much spare capacity producers have, should supplies be affected beyond Iran, is uncertain.
Speaking on Tuesday at the EEF, Novak said that despite the Vienna accord helping the oil market to overcome a price slump crisis, the market is still "fragile" due to production declines in some countries, including Venezuela, Reuters reported. He added the market was still being influenced by geopolitical issues, such as uncertainty over Iran.
Oil prices rose on Wednesday as the upcoming sanctions against Iran raised expectations of tightening supply and following Novak's comments, as well as a report of declines in U.S. crude inventories.
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