Crude Oil Smashes $80/b On Iran Sanctions, Lower Supplies

WTI Crude Oil

Oil's rise could meanwhile further push up inflation, impacting growth by quickening the pace of expected increases in interest rates. The price for Brent crude oil, the global benchmark, was down 0.82 percent to $77.79 per barrel as of 9:15 a.m. EDT.

The CEO of French oil giant Total said on Thursday (May 17) he would not be surprised to see the price of a barrel of crude reach US$100 later this year.

Demand will remain strong and concerns over economic growth will probably prove temporary, analysts including Jeffrey Currie wrote in a note, adding that US shale and OPEC are unlikely to solve problems from potential supply disruptions.

Oil's advance to $80 brings it to the level that OPEC's biggest member, Saudi Arabia, is reportedly seeking to cover the cost of weighty domestic spending commitments.

According to Reuters, Brent crude futures were last down 65 cents at $77.78 a barrel by 11:47 GMT, while U.S. crude futures fell 32 cents to $70.99 a barrel, leaving the spread between the two just shy of a 2015 high of $7 a barrel.

Over the past four years, Iran accounted for an average of 8.1% of China's crude imports; 17.5% of its PE imports; and 35.6% of methanol imports, according to official data.

The data poses worries that near-record high refinery runs may be short-lived. This is because of surging USA production, which now sits at a record 10.72 million bpd.

Brent Crude
Daily July Brent Crude

Prior to Thursday's oil-price rally, crude futures had already risen thanks to steady demand growth and a landmark production cut deal.

When sanctions were imposed in 2012, Iranian exports fell by about 1.2 million barrels per day, the organisation said. Refined oil product exports soared 46 percent on the year in April, but eased from the all-time high in March. Demand will remain strong and concerns over economic growth will probably prove temporary, Goldman's analysts said.

Goldman analysts shrugged off any concerns about demand destruction, painting a bullish picture for oil prices.

Global oil supplies could be hit by President Donald Trump's decision to pull the United States out of the Iran nuclear deal, and also by falling production in crisis-hit Venezuela, the International Energy Agency said on Wednesday.

Iran's oil buyers continue to buy its crude, assessing the implications of the sanctions during the 180-day wind-down period.

A rapid slide in oil supply from Venezuela, concern that U.S. sanctions will disrupt exports from Iran, and falling global inventories have all combined to push oil prices up almost 20 per cent in 2018. A major disruption in Iran could send crude prices higher just as the oil market is emerging from a prolonged period of oversupply.




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