With the EU embargo on Iranian oil over a month old and the US pulling out another sanctions dagger last week against global banks’ maneuvers to deal with the black gold from Tehran, the West understandably is hankering after reservoirs to quench their inflating oil thirst. Taking Iranian oil out of the commodity picture not only eradicates a major chunk of the global oil supply, it also results in massive oil price hike owing obviously to the gargantuan demand-supply disparity that it creates. And unless one believes in fairy tales there is no chance in hell that the sanctions screws would loosen up any time soon, hence the need for a regular oil supply source is becoming critical, especially for those that are dutifully abiding by the sanctions from Washington.
Saudi Arabia has vied to fill the void created by the absence of Iranian oil from the market, in a move that has put its stature as the leader of the ‘Islamic world’ under scrutiny. Even so, its own oil output has been slashed with 9.8m bpd pumped last month which was a 300,000 bpd decrease from June. Nonetheless, there is an oil-rich – albeit conflict stricken – zone in North Africa that is being touted by experts as the next go-to play for those nations whose industry is being aggravated owing to oil shortage. That hero of the day for the West, ladies and gentlemen, could be South Sudan.
Goldman Sachs, a well renowned energy team, sees South Sudan coming to the fore in the world oil markets, while it overcomes a neighborly row. A recent Sudan-South Sudan dispute resulted in 400,000 bpd of oil supply being shut down. The issue was miraculously resolved when Hilary Clinton, the US Secretary of State, had a nice little rendezvous with Salva Kiir, the South Sudan President. After which it took a matter of hours before the two North African neighboring countries took the first steps in overcoming a protracted dispute.
The row basically was a propos oil transit frees, since South Sudan being landlocked needs to supply its oil through pipelines running through Sudan to the global markets. The issue had resulted in the closure of South Sudanese oil production and around 50% of Sudanese oil output this year. And now with the transit fee issue settled expect oil to flow from the reservoirs of South Sudan, much to the delight of global oil markets.
Analysts however are still a bit apprehensive about the oil supply from South Sudan and claim that there is a lot to be done before the country becomes an oil supplier worth reckoning. The first thing that needs to be considered is that the timeframe and the roadmap with regards to South Sudanese oil returning to the market are still up for debate. Transit fee agreement might have settled the fiscal side of the debate but the dynamics and the schedule is still pretty ambiguous. 26th August will be a crucial day, when the concerned parties get together and mull the whole issue and try to come to a timely conclusion. However, there is not even a shadow of a doubt that if the oil from South Sudan were to return to the global markets it would indubitably ease quite a million Pascals of pressure created by the Iranian oil vacuum.
