(Bloomberg) -- Trafigura Group’s head of oil trading Ben Luckock said that US foreign policy towards Iran is the biggest upside risk to crude prices in an otherwise well supplied market.
“The two big unknowns are – how is the US going to deal with it’s trade issue with China and then how is the US going to deal with Iran and I think the Iranian one is the one that we need to watch out for,” Luckock said in an interview on Bloomberg TV. “You may find that pressure on Iran backs it into a corner and then we have to be careful.”
Iran’s oil exports have mushroomed in the past few years, but the return to the White House of Donald Trump — who led a policy of maximum pressure on Tehran when he was previously president — has created uncertainty about where they might be headed next.
Even so, supply does not appear to be particularly scarce, something that would cushion the impact of any disruption.
Trump’s actions and energy geopolitics have dominated market discussions as oil traders, producers and refiners meet in London for International Energy Week. Trafigura is one of the world’s biggest independent oil trading merchants, moving an average of 6 million barrels of oil and products a day last year, enough to cover demand from South Korea and Brazil combined.
Prices for Brent crude dipping into the low $70 a barrel range reflected in part how some of the risk premium — built into prices because of wars in Ukraine and across the Middle East — is “coming back out of the market,” said Luckock.
Those price levels are unlikely to spur Trump’s desired production boom in the US shale patch.
Shifting political moods either side of the Atlantic could see the US start to import Russian oil again before Europe should a deal over Ukraine be made, he said. The shadow fleet of oil tankers helping to ship supplies for Russia, Iran and Venezuela is now made up of about 1,000 vessels, Luckock added.
--With assistance from Tom Mackenzie and Lizzy Burden.
(Updates with estimated size of shadow fleet of oil tankers in final paragraph.)