Crude prices rebounded Friday amid expectations for US sanctions against Iran, which would cut off oil imports from the country, and a rise in global demand.
West Texas Intermediate crude jumped 1.3% after the International Energy Agency said in a report that planned US sanctions against Iran, the world’s fifth-largest producer, could threaten global oil supply. Brent, the international benchmark, rose 1.15%.
“As oil sanctions against Iran take effect, perhaps in combination with production problems elsewhere, maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion,” the agency said.
President Donald Trump announced in May the US would withdraw from the deal among world powers, which offers sanctions relief in exchange for restraints on Tehran’s nuclear weapons program. Some of those sanctions on metals and cars were reimposed this week.
Oil is expected to be hit in the next round of sanctions, which are scheduled to take effect in November. In June, the State Department called on buyers to stop importing Iranian oil by that time or risk facing US sanctions.
Analysts estimate that could put more than two million barrels per day at risk. But with opposition from other signatories of the Iran deal, especially European allies, FXTM strategist Hussein Sayed said it’s becoming difficult to guess how many barrels will be off the market by November. It also is not clear if the State Department would allow sanction waivers, which were used in the Obama era to wean the world off of Iranian oil and avoid supply shocks. Administration officials have said they might look at requests on a case-by-case basis, while also maintaining that the goal is to cut Iranian oil imports to zero.
At the same time, global demand appears poised to rise. The IEA raised its 2019 forecast for oil demand growth around the world by 110,000 barrels a day to 1.5 million barrels. Yahoo
