Iran fears send oil above $70 for first time since 2014
08 May, 2018, 00:57 | Author: Kevin Carter
Iran, a member of the Organization of the Petroleum Exporting Countries, re-emerged as a major oil exporter in January 2016 when some worldwide sanctions against Tehran were lifted in return for curbs on Iran's nuclear programme.
U.S. West Texas Intermediate (WTI) crude futures rose 84 cents to $70.56 per barrel. Prices climbed 0.3% last week. Looming over markets, however, is surging United States output, which has soared by more than a quarter in the last two years, to 10.62 million bpd.
"The market at this stage is pricing in a US stepping away from the nuclear deal, so it's allowed the risk premium to build even further", said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. It is being reported by Bloomberg that Saudi Arabia's former price doves on oil now want prices near $80 a barrel and former Price hawk Iran want staple prices in the $60 a barrel range. A decision is due by Saturday on whether the US will renew the waivers for some USA sanctions on Iran's oil exports.
While most analysts seem to believe that Trump has already made his decision and the sanctions will be reimposed, the U.S. President earlier this month lashed out against OPEC on Twitter for pushing prices too high, so there is a slim chance that he might reconsider his stance on the Iran nuclear deal, as new sanctions will for sure push prices even higher.
The dollar, which has enjoyed a sudden reversal in fortunes as investors bet on more Fed rate hikes and a slower pace of tightening in the euro zone, rose 0.3 percent versus the euro to $1.1928.
Oil prices have been on a tear over the past 12 months, rising more than 65 per cent from its US$42.50 per barrel low in June 2017 to recently breaching the US$70 per barrel level to start the week. The global benchmark crude, which is also on course for the highest close since November 2014, was at a $5.26 premium to July WTI.
Saudi Arabian energy minister Khalid al-Falih said he was concerned about possible shortages of spare crude production capacity. He added, however, "that doesn't mean I wouldn't negotiate a new agreement".
Meanwhile, the US' European allies continue to back the deal, saying it has been essential to reining in Iran's nuclear program.
Energy market consultant FGE has said that sanctions on Iran could cut its output by up to 500,000 barrels a day by the end of this year. The last time the United Nations imposed similar sanctions on Iran in 2006, the price of oil shot up from $60 to $145 U.S., the bank noted - although there were other factors at play at the time, too.
Since sanctions were eased in January 2016, Iran's crude production has almost doubled, while exports last month soared to record levels. U.S. energy companies added nine oil rigs looking for new production in the week to May 4, bringing the total count to 834, the highest level since March 2015, energy services firm Baker Hughes said last Friday.
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