WTI Clears $70 Level on Speculative Buying

08 May, 2018, 00:55 | Author: Eric Barnett
  • An oil well is seen at the Sindbad oil field near the Iraqi Iranian border in Basra

"It seems that the bureaucratic wheels are turning in Washington to prepare for a sanctions snapback", RBC Capital Markets analyst Helima Croft said in a note, adding that "the extraterritorial nature of USA sanctions, which cover energy, shipbuilding, finance, trade, insurance, etc., means that.Iran's oil exports could credibly be curtailed by 200,000-300,000 bpd".

Crude prices started the week in an upbeat mood on Monday, reaching their strongest level in nearly four years as traders increased their bets the US would pull out the Iran nuclear deal, raising the potential for tighter global oil stockpiles. Prices climbed 0.3% last week.

But US output has soared by more than a quarter in the past two years to 10.62-million barrels per day and is likely to rise further in 2018 as energy companies keep drilling.

President Hassan Rouhani said on Sunday Iran had plans to respond to any move by Trump and the USA would regret a decision to exit the accord. The timing couldn't be any better for them given the May 12 Iranian nuclear deal deadline that is putting President Trump in a very troubling position on whether to reimpose sanctions that would reduce Iranian oil exports, which would send oil prices even higher.

US gasoline and product prices will also rise. Energy stocks rose as crude oil prices traded above $70 a barrel for the first time since November 2014.


Brent for July settlement rose $0.73 to $75.60/bbl on the London-based ICE Futures Europe exchange. Shannon Rivkin, investment director of Australia's Rivkin Securities, said that oil prices had been driven up due to "growing concerns over the economic collapse of Venezuela and its oil industry, plus possible new sanctions against Iran from the Trump administration".

While refusing to reveal what he will do on Saturday, Trump reiterated his belief the existing accord is "a disgusting agreement for the United States", but "that doesn't mean I wouldn't negotiate a new agreement".

"If Trump abandons the deal, he risks a spike in global oil prices", said Ole Hansen, head of commodity strategy at Saxo Bank, adding that reintroducing USA sanctions could remove 300,000-500,000 bpd of Iranian oil from global supplies. America's European allies continue to back the deal, saying it has been essential to reining in Iran's nuclear program. A recent report by the International Energy Agency shows that global demand expanded by 1.5 million barrels per day a year ago, representing a 1.6 per cent annual increase. The last time the United Nations imposed similar sanctions on Iran in 2006, the price of oil shot up from $60 to $145 USA, the bank noted - although there were other factors at play at the time, too. Since sanctions were eased as of January 2016, Iran's crude production has nearly doubled and its exports soared last month to record levels.

In other data, the United States rig count increased by nine to a total of 834 producing oil rigs.

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