Oil Prices Go Up as Sanctions Curb Iranian Exports

06 September, 2018, 01:45 | Author: Elaine Woods
  • A man puts gas in his car at a Shell filling station in Tokyo Friday Nov. 28 2014

Brent crude, the global benchmark, was up 0.58% to $78.09 a barrel on London's Intercontinental Exchange.

His thoughts came as WTI crude oil exceeded $70 a barrel on Thursday, and rallied to one month highs.

The sanctions were originally halted in 2015, when China, Russia, Britain, France, Germany, the European Union, Russia, the UK, Iran and the U.S. signed the Joint Comprehensive Plan of Action - also known as Iran nuclear deal.

With China and India remaining as customers, Iran will not be fully cut off from the global oil markets from November, when USA sanctions against the Islamic Republic's petroleum sector are due to start.

An emerging pattern shows that the U.S. sanctions are succeeding in throttling Iran's sales to its customers even before the measures take effect in early November.

US crude was unchanged at $69.80/Bbl, Kallanish Energy reports. However, these gains were still limited since higher oil supplies were coming in from OPEC as well as the US.

OPEC and its allies agreed in June to increase combined output by 1 MMbpd to meet consumer demand and prevent a sharp rise in prices.

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FGE estimates Iran's exports will slump to below 1 million barrels a day by mid-2019, while industry consultant Energy Aspects Ltd. expects a plunge of 1.5 to 1.7 million in daily shipments by the end of this year from current levels of about 2.5 million.

Money managers are bullish on West Texas Intermediate crude futures, but not as much as on Brent. In July, Japan lifted more than 183,000 barrels per day of Iranian oil, raising imports for the third consecutive month year on year.

Japan's efforts to get a waiver from Washington that would allow it to continue importing oil from Iran appear to have been unsuccessful, according to Jiji Press, who adds that Japanese oil companies are now forced to prepare to suspend Iranian imports and investigate ways in which they can switch to other Middle East producers.

Kildruff predicts that oil prices could near the $85-$95 range due to the loss of Iranian oil worldwide and rising gasoline demands.

A set of US sanctions targeting Iran's oil industry is due to take effect in November.

While investors are now enjoying the bullish wave in oil markets, it is important to keep an eye on the bearish flashpoints hanging over markets this September. On Tuesday prices had climbed to $79.72, their highest since May.

The larger-than-expected draw in USA crude inventories for the week ended August 24 has been keeping prices supported, analysts said.

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