Published: Fri, May 18, 2018
Economy | By

Oil Traders Brace For Renewed Sanctions On Iran

Oil Traders Brace For Renewed Sanctions On Iran

U.S. President Donald Trump announced last week that the United States would withdraw from the Iran nuclear deal, a landmark worldwide agreement signed in 2015.

Brent for July settlement rose as much as 90 cents to $80.18 a barrel on the London-based ICE Futures Europe exchange, the highest since November 2014, and was at $79.90 as of 1:39 p.m. local time. Meanwhile, a majority of the growth in global oil production an be attributed to natural gas liquids and condensates, which both are useless in making middle distillates.

The IEA said the previous round of sanctions, which were lifted in early 2016, cut Iran's crude exports by more than 1 million bpd.

The International Energy Agency warned global demand is likely to moderate this year as crude prices near $80 a barrel and many key importing countries no longer offer consumers generous fuel subsidies.

Renewed US sanctions on third-largest Opec producer Iran and shrinking supplies from Venezuela have buoyed crude's recent rally.

"The geo-political noise and escalation fears are here to stay", said Norbert RŶcker, Head of Macro & Commodity Research, at Swiss bank Julius Baer. "We continued to receive support from concerns about supply from the Iranian nuclear accord, well as the draw in crude", McGillian said.

Oil stocks were expected to drop further as the peak summer driving season nears, offsetting increases in US shale output, Bernstein analysts said.

The American Petroleum Institute was said to report USA crude stockpiles climbed 4.85 million barrels last week, and that inventories at the key pipeline and storage hub Cushing, Oklahoma, rose 62,000 barrels.

ANZ said the falling USA inventories were "raising concerns of tight markets heading into the US driving season", during which demand typically rises.

Compounding this, Venezuela's continued deterioration in output, which has dropped by around 40% over the last two years from 2.35 million b/d, has elevated supply concerns, he said.

The result has been a widening difference between US crude and benchmark Brent.

World oil prices have surged by more than 70 percent over the past year as demand has risen sharply but production has been restricted by the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers including Russian Federation.

"While some non-U. S. companies appear determined to maintain ties with Iranian oil, [French energy giant] Total has moved to halt further investment in Iran based on concerns over USA sanctions and Total's presence in the US market", he said in a daily note.

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