On Friday evening, oil prices had moved slightly higher but it declined quickly as it was evident that Turkey’s ports, shipping routes and transport arteries were still open for oil traffic in spite of the Turkish coup attempt, said Nordea Bank in a research report. Turkey is not a significant oil or gas producing nation.
However, it is a very important transit nation for oil and gas between Europe and Asia. Particularly, the Baku-Tbilisi-Ceyhan pipeline and Turkey’s two straits, the Bosporus and the Dardanelles, are important with 2.9 million barrels running through every day.
The Baku-Tbilisi-Ceyhan pipeline runs one million barrels every day and is the main route for oil pumped in the Caspian Sea. Increasing oil exports from the Caspian region, particularly Kazakhstan and Azerbaijan, keep Turkey’s straits two of the most significant transport routes globally, noted Nordea Bank. Around 2.9 million barrels of oil were transported every day via these straits in 2013 with oil products accounting for 30 percent and crude oil 70 percent.
Market players are concerned that the increasing political unrest in Turkey might threaten the oil supplies’ stability through these important transport routes.
Currently, oil and oil products inventories are sky-high and will be sufficient if there are any short-term disruptions. If the significant routes are blocked on a longer-term basis, oil prices might rise sharply, according to Nordea Bank.
Meanwhile, the energy consumption in Turkey has surged in recent years because of higher standards of living and economic growth. In the last ten years, Turkey’s oil consumption has increased 27 percent, while its gas consumption has grown 62 percent. Political unrest might jeopardize the country’s investment activity and economic growth. This might in turn result in a noticeable deceleration in energy consumption in the future.
About 90 percent of the country’s oil consumption and 99 percent of its gas consumption are taken care by imports. Thus a steep fall in energy consumption would considerably affect the export income of the major gas and oil suppliers, noted Nordea Bank.
Most of Turkey’s oil import needs are covered by Iraq and Iran. However, Nigeria, Saudi Arabia, Kazakhstan and Russia are also major oil suppliers of Turkey. Reduced growth or demand for oil might exert less pressure on global oil balance and stop the reduction in the considerably overproduction, thereby curbing oil price growth in the future.
This raises the risk of oil prices remaining below the estimate of USD 52 per barrel in the second quarter, stated Nordea Bank. Meanwhile, Russia covers over half of Turkey’s gas import requirements. Turkey is Russia’s second-biggest export market.
