Oil Prices Mix but Stay Close 2014 Highs on Iran Sanctions

Oil prices were mixed on Wednesday but were still on track for a fifth consecutive quarter of gains due to an imminent loss in Iranian crude exports in the past three months of the year when global demand grows stronger.   

US West Texas Intermediate (WTI) futures for November delivery fell 0.1 percent to $72.14 per barrel, while December contract Brent crude futures rose 0.09 percent to $81.33 per barrel after climbing as much as $82.55 on Tuesday, its highest since November 2014.

Pending Loss in Iran’s Oil Exports

The US sanctions is due to impose sanctions that will stop oil exports from Iran, OPEC’s third-largest producer, on November 4. The impending fall of Iranian supply has significantly contributed to the recent rise in crude prices.

A number of huge buyers of Iranian crude, like several Indian refiners, are considering reducing their purchases, but the exact impact of the loss of Iranian supplies on the global market balance is not yet clear.

Iran has the opportunity to direct oil through Iraq and the country will still be able to find buyers in Asia. There is also the possibility of exports not dropping by 1 million barrels per day (bpd).        

It is a huge unknown how big the impact will be but markets have been careful in requiring a major reduction in exports, which might suggest the loss in Iranian oil exports would be around 500,000 bpd, rather than 1 million bpd, like in the last round of sanctions.    

Still, US officials, including US President Donald Trump, are trying to put buyers’ and investors’ mind at ease by guaranteeing ample supply will be present in the market and have called for OPEC to increase production.   

Washington’s special envoy for Iran Brian Hook said they will ensure prior to the re-imposition of their sanctions that they have a well-supplied crude market.

Trump reiterated his calls on OPEC to add more oil and stop pushing prices higher, and has claimed that Iran’s leaders sow chaos, promising more sanctions on the country.

The OPEC+ group, which includes Russia, the world’s largest producer, held talks over the weekend although they saw no reason to produce more crude since the market remains well-supplied.   

As a result, Brent is heading towards its fifth consecutive quarterly gain, marking the longest period for the international benchmark since early 2007, when a six-quarter course resulted to a record-high of $147.50 per barrel.

US crude supplies meanwhile, grew 2.9 million barrels in the week to September 21 to 400 million, compared with analysts’ forecasts for a fall of 1.3 million barrels, according to the American Petroleum Institute (API).

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