…As Iran Warns Of Market Fragility Over Sanctions
Yemisi Izuora
Oil prices rose to fresh highs for the year on Tuesday, after a U.S. official said Washington is considering more sanctions on Iran and a key Venezuelan export terminal halted operations.
Price were also underpinned by a Reuters survey showing OPEC oil supply sank to a four-year low in March, and positive data from the world’s biggest economies, the United States and China.
Subsequently, Brent crude rose 26 cents, or 0.4 per cent, to $69.27 a barrel having earlier touched $69.29, a new high for 2019.
U.S. West Texas Intermediate (WTI) futures rose 28 cents, or 0.5 per cent to $61.87 a barrel, earlier reaching $61.89, also a new high for 2019. WTI closed up 2.4 per cent on Monday.
The U.S. government is considering additional sanctions against Iran that would target areas of its economy that have not been hit before, a senior Trump administration official told reporters on Monday.
The official also suggested that the U.S. may not extend waivers from sanctions on Iranian oil exports to a group of eight importers that expire next month.
“That, I think, is where we’re headed,” the official said.
Venezuela’s Jose crude export terminal has halted operations due to a lack of electricity supply, two sources with knowledge of the situation said, after restarting on Friday following a prolonged blackout.
Production cuts from the Organization of the Petroleum Exporting Countries (OPEC) helped push the group’s supply to a four-year low in March, a Reuters survey found.
The world’s biggest exporter, Saudi Arabia, over-delivered on the group’s supply-cutting pact while Venezuelan output fell further due to U.S. sanctions and earlier power outages.
Markets also rallied on Monday after upbeat economic numbers from the United States and China eased worries about slowing global growth.
Meanwhile, Iranian oil minister, Bijan Zanganeh on Monday observed that the balance between supply and demand in the oil market is fragile, as he called on crude producers to be wary of troubles caused by U.S. sanctions.
Oil prices are being supported by U.S. sanctions on Iran and Venezuela along with voluntary supply cuts by the Organization of the Petroleum Exporting Countries and other major producers. “Oil market is in a fragile situation considering the supply and demand balance, so the oil producers should be wary of any trouble in the oil market, especially due to U.S. measures against big oil producers,” Zanganeh was quoted as saying by state news agency IRNA upon his arrival in Moscow.
Zanganeh was travelling to Moscow to discuss the oil market with his Russian counterpart Russian Energy Minister Alexander Novak.
“Russia is one of the biggest oil producers in the world, and we are in a situation that we thought it is necessary to discuss the oil market with our Russian friends,” Zanganeh said.
The U.S. reimposed sanctions on Tehran in November after pulling out of a 2015 nuclear accord between Iran and six world powers. Those sanctions have already halved Iranian oil exports.
The United States is likely to renew waivers to sanctions for most countries buying Iranian crude, including the biggest buyers China and India, in exchange for pledges to cut combined imports to below 1 million barrels per day.
U.S. President Donald Trump eventually aims to halt Iranian oil exports and thereby choke off Tehran’s main source of revenue. Washington is pressuring Iran to curtail its nuclear programme and stop backing militant proxies across the Middle East.