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Gastón Saidman | Public Relation and Goverment Relations, Israel-Chyprus Chamber of Commerce. | Main | Articles | 5/6/2019

VENEZUELA, ISRAEL, THE MIDDLE EAST AND THE UNCERTAINTY OF THE ENERGY MARKET

The latest scandal in Venezuela surprised the energy market precisely because the price did not meet the expectation. Although the analysts along with the investors expected to see a sharp increase in prices after the crash at the beginning of 2019, the blockade of Venezuela was supposed to push the price higher but it was not the case.

When Saudi Arabia thought that in a matter of months Trump will strengthen the sanctions against Iran, together with Russia they started a super oil production preparing for the price rise that was supposed to start in 2019. This ambitious idea was stalled by the murder of Saudi journalist Jamal Khashoggi in which the Prince of Arabia was the main suspect. The United States immediately began a series of threats of sanctions that strongly affected the oil production in Saudi Arabia.

The interesting thing about this whole story is that in a market where production was limited, the price did not rise according to the expectations. However, what worried the investors even more is that the price did not recover after the crisis in Venezuela due to Maduro's scandal. The price did not go back up even after Trump's decision to block Venezuelan export to the US, which in itself is already harming the US refineries that are located on the gulf's coast.

This would be of great importance considering that Venezuela produces oil qualified as "Heavy crude oil" that cannot easily flow due to the large amount of sulfur it contains which makes it difficult to obtain. This kind of oil is very sought after in the market since the barrel is bought and sold below the current price. Bearing this in mind, the price of oil did not fluctuate much, if we look from the beginning of January, the price was 52-55$BPD, after it already was 79.00$. The drop to $50 was intended to be just a low number before the big rise, which once again was stalled because the investors were not sure of the future relations between China and the US. – Although the commercial negotiations between these two countries continued advancing.

China will not be affected by this situation because together with India they are the only countries that will continue buying Venezuelan oil in spite of Trump's sanctions.

Even if the blockade will affect the transport of oil from Venezuela to China, China will receive the oil from Russia. Although Russia was the only country that continued to export oil products to Venezuela and maintained a certain commercial relationship with her in order to help with the financial problems that Venezuela faced, it will not be able to ignore the decision of companies such as "Litasco" and "Gazprom Neft", two Russian companies that decided to join the blockade and stop the export of oil products to Venezuela, making the blockade much more global.

Meanwhile, Israel makes some moves

While the world is in this endless geopolitical and economic battle, Israel is preparing for major changes in the energy sector. It is known that a large gas reserve was discovered offshore of the northern city of Haifa. This means that what once was a dream now became a reality, a reality that led us to achieve pipeline agreements with Egypt and Jordan to join the transfer of gas from the shared maritime economic areas between Israel and Cyprus to these two Arab countries and in the near future to Europe. What is happening at the moment in the energy market does not affect the Middle East countries, except for Iran or Saudi Arabia, since these two countries apart from fighting for the Islamic world leadership, are also influenced by geopolitics that influence the oil market. Even more if one of them will have to faces international sanctions.

This ambitious project will unite the Mediterranean countries through the new pipeline is in its final stages. Israel is expecting local and foreign companies to submit their bids until the end of April and to start drilling in the new maritime territories. Meanwhile, Israel already received the last instruments needed to finish building the platform. These were manufactured in Houston, Texas and are about 98 meters high, weigh approximately 15,000 tons and reach a depth of about 86 meters. In the second half of the year, the platform is expected to start drilling. Once the construction is completed a preliminary test will be done before the gas is delivered to the local market, which is calculated to be at the end of 2019.

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