Oil reaches its highest since November
Oil prices have reached their highest levels since November on Tuesday after Washington announced all waivers on imports of sanctions of sanctions-reached Iranian oil would end next week, pressuring importers to stop buying from Tehran and further tightening global supply.
Brent crude futures were at $74.25 per barrel at 1055 GMT, up 21 cents or 0.28% from their last close, after hitting their loftiest level since November at $74.70.
U.S. West Texas Intermediate crude futures were at $65.94 per barrel, up 39 cents or 0.59%, having marked their strongest since October at $66.19 in earlier trading.
Despite the move by Washington, the spare capacity of other suppliers such as Saudi Arabia could ensure that the oil markets will cope with a cut in Iranian exports.
“The oil price is likely going to continue on its current bull-ride for a while before Saudi Arabia decides to pitch in with substantially more production,” SEB commodities strategist Bjarne Schieldrop said.
On Monday, the United States asked that buyers of Iranian oil to end their purchases by May 1 or face sanctions to end the 6-months of waivers that allowed the eight largest buyers in Iran to continue to import limited volumes.
Before the re-imposition of sanctions last year, Iran was the fourth-largest producer in the Organization of Petroleum Exporting Countries at around 3 million barrels per day, but April exports fell below 1 million barrels per day, according to tanker data and industry sources.
China, Iran’s largest customer with imports of about 585,400 bpd of crude oil last year, formally complained to Washington over the move, which a Chinese foreign ministry spokesman said “will contribute to volatility in the Middle East and in the international energy market”.
US President Donald Trump is confident that Saudi Arabia and the United Arab Emirates will fulfill their pledges to make up the gap in oil markets, a US official told reporters.
Saudi Energy Minister Khalid al-Falih said on Monday that his country would “coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance”.
Saudi Arabia is the largest oil exporter in the world and a the leader of OPEC, which since the beginning of the year has led global supply cuts at propping up crude prices.
The group will meet in June to discuss output policy.
Barclays bank said in a note that the U.S. decision took many market participants by surprise and would “lead to a significant tightening of oil markets”.
The move to increase pressure on Iran came amid other sanctions that Washington has placed on Venezuelan oil exports and as the fight threatens to disrupt Libya’s exports.