Oil ladders as Iran sanctions take effect
Iran: US economic sanctions against Iran, the third largest producer in the Organization for Petroleum Exporting Countries, came into force on Monday. Exports of Iranian crude oil have already fallen rapidly, as buyers have reduced their purchases before the November 4 deadline mandated by the United States
. Crude shipments from Iran fell to about 1.5 million barrels a day in September, compared to 2.3 million barrels of export in June, according to people familiar with the case. Analysts have estimated that more than a million barrels per day of Iran's exports could ultimately be removed from the market, which could further tighten the offer.
Gas blasts burn from pipes aboard an offshore oil platform in the Persian Gulf's Salman Oil Field, operated by National Iranian Offshore Oil Co., January 5.
Photo:
Ali Mohammadi / Bloomberg News
Still, the "extreme scenarios for restrictions on Iranian commodity … are ignored, even when sanctions formally hit the impact", according to analysts at consultancy JBC Energy. President Trump in May pulled the US out of a worldwide 2015 agreement to curb Iran's nuclear program and set the scene to restore economic sanctions.
Recent Selloff: Burned Friday closed at its lowest level since August while WTI closed the day at its weakest point since April. Raw prices have fallen about 15% since the beginning of last month when Brent violated the $ 86-a-barrel limit for the first time in four years.
"And even more observers thought in early October that the price could climb to $ 100," analysts on
Commerzbank
wrote in a note Monday. "What has happened since then to get prices to react so differently? One important reason is that OPEC, Russia and the US have significantly increased oil supply."
Prices have also been under pressure due to signs of weakening global economic growth and turmoil in the stock market.
INSIGHT
Further upside: Some observers of the oil market are still optimistic that US sanctions against Iran and further supply reductions from the Islamic republic could again hit the oil market bullish before the year is out.
In mid-November, the "speculative powered selloff centered on US warehouse will be completed [and]. Iran's oil tensions will increasingly begin to appear in global records in the second half of November," says Bjarne Schieldrop, analyst at the corporate market at SEB Markets.
In addition, a further slide in Iranian rough exports to around one million barrels per day will lead to a close oil balance for the rest of the year, despite Saudi Arabia producing nearly 11 million barrels a day, "according to Tamas Varga, Analyst at Broker PVM Oil Associates Ltd.
AHEAD
The American Petroleum Institute, an industry group, publishes weekly data Tuesday on US oil inventories, followed by official data from Energy Information Administration Wednesday. 19659008] OPEC and its production federations, including Russia, meet in Abu Dhabi November 11 to assess their almost two year old deal to limit production.
The price of a gas tank has risen, and future US sanctions against Iranian average drivers may be on for even more pain at the pump. But that's not the whole story. WSJ Sarah Kent explains why global oil prices are on the knife edge. Photo: Getty Images
Write to Christopher Alessi at christopher.alessi@wsj.com and Amrith Ramkumar at amrith.ramkumar@wsj.com
