Mubasher: Oil was near its highest level so far this year on Tuesday after the US announced an end to all Iran sanction exemptions next May, pushing importers to cut their crude purchases, Reuters reported.
Nevertheless, observers, including US bank Goldman Sachs, expected that global oil markets would be able to adapt to the Iranian crude shortage, with sufficient spare capacity from other producers.
By 7:43 am GMT, US Nymex crude futures climbed 0.63% to $65.96 per barrel (pb) just $0.1 above the highest level since October 2018, while global benchmark Brent futures rose 0.31% to $74.27 pb, having hit $74.52 pb in the prior session.
Washington urged other importers of Iranian barrels to cease their purchases by 1 May or risk being sanctioned.
The move is set to end six months of waivers under which Tehran’s largest eight buyers, mostly in Asia, were allowed to resume importing limited amount of barrels.
Before the White House re-instated sanctions against Iran last year, Iran was the fourth biggest exporter among the members of the Organization of the Petroleum Exporting Countries (OPEC) with output reaching around 3 million barrels per day (bpd).
Iran’s oil shipments have faded to just below 1 million bpd in April, Reuters citied ship tracking data in Refinitiv.
Washington’s surprising move would “lead to a significant tightening of oil markets,” Barclays said in a note.
The US pressure to slash Iranian crude exports to zero posed a “material upside risk to our current $70 per barrel average price forecast for Brent this year, compared with the year-to-date average of $65 per barrel,” the UK lender said.
That said, analysts also expected the US administration to be more lenient towards importers most exposed to the oil-rich nation, according to the news agency.
Moreover, Goldman Sachs projected Iranian crude barrels to decline by 900,000 bpd after the end of sanction waivers “versus immediately available and demonstrated spare capacity of 2 million bpd, which is set to grow further later this year,” most specifically if OPEC decided to end its supply curbs.
