US sanctions on Iran drive oil prices higher

08 August, 2018, 00:54 | Author: Eric Barnett
  • Oil rises as U.S. renew sanctions against Iran

"Anyone doing business with Iran will not be doing business with the United States", he stated through his Twitter account.

The WTI Crude Oil market tried to rally again during the day on Tuesday, but just like the Monday session we ended up finding sellers close to the $70 level again and rolled over.

US sanctions on Iran's energy sector are set to be re-imposed after a 180-day "wind-down period" ending on November 4.

Amrita Sen, chief oil analyst at Energy Aspects, said: "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose".

"It certainly is a reminder to everyone that the U.S.is serious about sanctions, and it's doubtful they will grant waivers", said John Kilduff, partner at Again Capital Management in NY.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher early Monday amid reports of a drop in Saudi crude production in July and speculation that American shale drilling may be plateauing. West Texas Intermediate, the USA benchmark for the price of oil, was up 0.8 percent to $69.56 per barrel.

French bank Societe Generale said there was now a "comfortable supply" in physical crude markets, but noted, "Iran sanctions will take another one million bpd off the markets".


"Saudi Arabia knows that the United States really does want to see maximum impact from sanctions towards Iran, which means that they want to prepare all buyers of Iranian crude to say 'there is plenty of oil in the market and don't be afraid to pull back on Iran (purchases)", said Bjarne Schieldrop, head of commodities strategy at SEB.

Meanwhile, other major producers are ramping up their output.

Europe-which as a whole has been Iran's third-biggest single customer-saw imports drop to 465,450 bpd last month from 485,768 bpd in June, with demand from France, Spain, and Turkey down and purchases from Italy and Greece steadily up. Some analysts warned that a global heat wave could also now affect oil demand.

Additionally, there are also reports that many US shale oil drillers posted disappointing quarterly results in recent weeks, hit by rising operating costs, hedging losses and a drop in crude prices away from 2018 highs reached between May and July.

This is not about bombarding the market with oil and pushing the price into the $50s, it is about preparing the market and easing the transition, he said.

This mostly impacts demand for power fuels such as thermal coal and natural gas.

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