Oil prices rose by over 1 per cent in trading on Friday on signs that the Trump administrations sanctions against Iranian crude exports could significantly limit the world’s oil supply. Linn Energy photo.
Oil prices up over 1 per cent
Oil prices rose by over 1 per cent on Friday as the market grew more concerned that looming Trump administration sanctions on Iranian crude exports could significantly impact the global supply of crude.
At the end of the session, Brent crude was up $1.09, or 1.5 per cent to $75.82/barrel and US crude rose 89 cents to $68.74. The Canadian Crude Index climbed 94 cents, or 2.22 per cent to $43.21.
On the week, US crude jumped 4 per cent after seven weeks of declines and Brent rose 5.3 per cent after three consecutive weeks of lower prices.
“Both crude markers are on track to end a steady run of weekly declines. This is largely due to a tightening fundamental outlook on the back of looming Iranian supply shortages,” Stephen Brennock, analyst at London brokerage PVM Oil Associates told Reuters.
Traders said that the market is also concerned that the incoming administration in Mexico will not strike a bilateral agreement over NAFTA with the United States. One major dispute in the negotiations is opening up the oil and gas sector in Mexico, according to Bloomberg sources.
Reuters reports there are intensifying signs that US sanctions on Iranian crude are beginning to curb that country’s oil exports.
“Third-party reports indicate that Iranian tanker loadings are already down by around 700,000 b/d in the first half of August relative to July, which if it holds will exceed most expectations,” Reuters reports U.S. investment bank Jefferies said on Friday.
As such, Jefferies added that “We expect that by Q4 the market will be dealing with either undersupply, dwindling spare capacity – or both”.
Iran is the world’s third largest producer in OPEC and has a daily output of about 2.5 million barrels of crude and condensate. This is equal to about 2.5 per cent of the world’s consumption.
Energy consultancy FGE forecasts Iranian crude and condensate exports to fall below 1 million b/d by the middle of next year.
The Trump administration abandoned the Iran sanction relief deal in the spring, arguing the deal signed by former President Barack Obama was inadequate for curbing Tehran’s activities in the Middle East. The US government argues slashing funds to Iran will deny it the means to make an atomic bomb. The Iranian government denies such ambitions.
The US dollar fell on Friday, helping make oil more affordable for customers using other currencies and boosting the price of oil.
According to Reuters, the greenback fell after Federal Reserve Chair Jerome Powell said steady interest rate hikes will best protect the US economic recovery.
Also on Friday, Baker Hughes released its weekly rig count. Last week, the US rig count fell by nine to 860, the largest drop since May 2016. In Canada, the oil rig count was up by 12 to 153, 38 more than this time last year.
Next month, workers on three oil and gas platforms in the North Sea are set to strike and during the job action, oil production will be halted. These three fields amount to between 45,000 to 50,000 b/d of the North Sea’s Forties and Brent crude streams.