Brent gains after Washington imposes more sanctions on Iranian oil
The front-month ICE Brent contract has moved $1.14/bbl higher on the day, to trade at $66.34/bbl at 09.00 GMT.
IMAGE: Oil barrels. Getty Images
Upward pressure:
Tighter US sanctions on Iranian oil have supported Brent’s price gains today. The US government has sanctioned two vessels and nearly two dozen firms, for allegedly transporting Iranian oil.
These vessels and their owners facilitated transport of oil and petroleum products on behalf of Iran’s Armed Forces General Staff (AFGS), according to the US Department of the Treasury’s Office of Foreign Assets Control (OFAC). One of the “key catalyst” to oil prices “is the threat of further sanctions on Iranian oil exports,” two analysts from ING Bank remarked.
US President Donald Trump has also warned that Washington will exert maximum pressure on Tehran’s oil exports if a nuclear deal with the OPEC+ member is not reached soon, according to market reports.
Trump’s announcement was “backed up by the US State Department, which said that it’s sanctioning an international network facilitating the shipment of Iranian crude to China,” ANZ Bank’s senior commodity strategist Daniel Hynes said.
Downward pressure:
However, some of the losses in the global oil market from the clampdown on Iranian oil exports may be offset by increased output from the OPEC+ alliance.
In April, the Vienna-headquartered group surprised the oil market by tripling its planned production hike to 411,000 b/d for May and agreed to extend that increase through June – the second month in a row. The group plans to expedite the unwinding of its 2.2 million b/d output cut.
“Expectations are rising that Saudi Arabia may push for another acceleration of production hikes the group have already approved,” Hynes added.
On the demand side, Brent’s price felt some downward pressure after the American Petroleum Institute (API) reported a sizeable increase in US crude stocks.
US crude oil inventories rose by 4.3 million bbls in the week ending 9 May, according to API estimates. The data has surprised market analysts as they predicted a draw in US crude stocks.
The API numbers were “very different from the roughly 2m [2 million] barrel draw the market expected,” ING Bank analysts noted.
A buildup in inventories typically signals weaker oil demand, which can put downward pressure on Brent's price.
By Aparupa Mazumder
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