Published: Mon, May 07, 2018
Money | By Hannah Jacobs

Oil prices above $70

Oil prices above $70

Restoring sanctions on Iran could affect as many as 1 million barrels per day of crude supply.

Iran resumed its role as a major oil exporter in January 2016 when worldwide sanctions against Tehran were lifted in return for curbs on Iran's nuclear programme.

Also supporting prices, North Sea oilfields connected to the Brent oil pipeline have stopped production due to a shutdown at the UK's Sullom Voe oil terminal, the Brent pipeline operator said, reducing output of the crude. So if the USA decides to reimpose sanctions, the oil market could lose just under 1% of total global production, he says. "But if new sanctions are created and the US pressures European Union nations to follow suit, then the market could be looking much different in a few short months". Saudi Arabia remains the world's largest exporter of crude, though since January amid the OPEC/non-OPEC production cut agreement that figure has fallen.

"Expectations that the United States will pull out of the (Iran nuclear) deal and refrain from extending sanctions relief are keeping both crude markers near three-year peaks", he added.

But Shum said the impact is unlikely to be as severe as the multinational sanctions imposed on Iran in 2012.


West Texas Intermediate oil for June delivery climbed as much as 97 cents to $70.69 a barrel on the New York Mercantile Exchange and traded at $70.55 at 1:12 p.m.in Dubai. Brent futures on ICE Futures Europe also saw a session high above $75 for the first time in nearly a week.

Monday was the first time since November 2014 that WTI rose above $70 per barrel.

Nonetheless, U.S. crude exports are poised for an upward trajectory. There would also "be more incentive for OPEC members to cheat on", or consider raising, their production quotas.

Trump has said that unless European allies rectify the "terrible flaws" in the worldwide accord by May 12, he will refuse to extend USA sanctions relief for the oil-producing Islamic Republic.

WTI is set for gain of 0.3 percent for the week.


The day's eye-catching moves came in energy markets.

Alhajji expects that actual exports will probably decline "only marginally", while "legal" exports might decline significantly. President Donald Trump for Europeans to "fix" the deal with Iran over its nuclear program.

If the U.S. does decide to withdraw from the deal, as many analysts expect, that would be bullish for oil prices in the long-term, although some expect that if a withdrawal has been baked into current levels for crude, an immediate sell-off could follow. That could lead to even broader implications.

If they do not, Trump has said he would refuse to extend US sanctions relief for the oil-producing Islamic Republic. But it's the Iran question that's driving short-term trading, experts say.


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