Iranian oil exports surge ahead of USA sanctions

Crude Pundits Gloomy in Wake of Friday's Soft Market Performance and Possible Woes Ahead

“But it is still far from certain that they will bite in the way intended.

"The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela)". Crude oil prices moved up during European trading hours and continued to rise during United States trading hours.

Although it is early days, demand for Iranian crude in China and India is likely to remain very strong despite the sanctions, although refiners in Europe, South Korea and Japan are likely to tread more carefully. Historically, the negative consumption response dominated the increase in oil investment.

US West Texas Intermediate (WTI) crude futures were at $71.02 a barrel, up 6c and also not far off their November 2014 high of $71.89 a barrel, reached last week.

Wendy Sherman, who served as undersecretary of state under the Obama administration and helped craft the historic nuclear deal with Iran, said during a phone call Tuesday that new USA sanctions would likely amount to higher gas prices. On Friday, WTI closed at $70.70 per barrel after rising $2 during the week.

In last month's report, OPEC said that it expects non-OPEC supply to grow by 1.71 million barrels per day in 2018, with the US accounting for most of the supply growth.

"The geopolitical tinderbox around the Middle East seems to be encouraging buyers, while global supply demand fundamental are staying "strong enough" to keep the sellers at bay for now", analysts at TAC Energy said. "Rhetoric out of Europe, Iran and even OPEC itself in terms of potential supply compensation makes it really hard to establish a view with a decent degree of conviction regarding timing and size of any supply reduction due to sanctions".

- Oil prices are at four-year highs, raising the price of producing gasoline.

Following the news that the USA government will withdraw from the nuclear accord with Iran or Joint Comprehensive Plan of Action (JCPOA) and re-impose sanctions on the country, Will Scargill, Senior Fiscal Analyst for Oil & Gas at GlobalData, considers the impact that this could have on Iranian oil production. Tennessee gas prices rose 3 cents during the past week to $2.62 per gallon, the highest daily price since November 2014.

"The US decision to end all nuclear-related sanctions waivers for Iran will smooth the re-entry of (previously) cut OPEC, non-OPEC barrels to market in 2019 (as) it will allow OPEC and Russian Federation to shift their narratives on production from restraint to growth, without derailing the global recovery in oil prices", BMI Research said in a note. He serves this year as the group's president.

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