Crude oil prices are continuing their year-to-date surge amid news the US does not plan to extend current waivers to its sanctions on Iranian oil exports.
The global benchmark Brent is pushing $75 per barrel, its highest level since November 2018 when sanctions were re-imposed by the Trump administration.
This move actually saw prices fall as exemptions were granted to eight countries but it looks as if these will not be extended when they expire on 2 May.
Iran’s oil exports were reduced by more than 1m barrels a day between 2012 and 2015 amid sanctions from the US and EU to force Tehran to negotiate over its nuclear programme.
It subsequently increased oil production after sanctions were lifted following an agreement on nuclear activities.
Investment bank ING comments: ‘Iranian oil exports over March averaged 1.3MMbbls/d, according to Bloomberg ship tracking data, and so if the US is successful in reducing exports to zero, this would lead to significant tightness in the oil market. However, we do believe that cutting off exports completely is an unlikely scenario.’
It adds that in the circumstances Saudi Arabia dominated cartel OPEC (plus Russia and other major producers) will struggle to justify extending their current production cut deal through the second half of 2019.
We discussed the prospects for the oil price in this recent article.