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Iran: U.S. economic sanctions on Iran-the third largest producer in the Organization of the Petroleum Exporting Countries-came into effect Monday. Exports of Iranian crude as soon as possible, as buyers have reduced their purchases ahead of the rest. Nov. 4 deadline mandated by the U.S.
Crude shipments from Iran dropped to about 1.5 million barrels a day in September, compared with 2.3 million barrels a day of exports in June, according to people familiar with the matter. Analysts have estimated that a million barrels a day of Iran's exports could be taken from the market, which could further tighten supply.
Gas flares burn from pipes in an offshore oil platform in the Persian Gulf's Salman Oil Field, operated by the Iranian National Offshore Oil Co., on Jan. 5.
Photo:
Ali Mohammadi / Bloomberg News
Still, so far, the "most extreme scenarios for constraints on Iranian crude … are now being disrupted even as sanctions formally take effect," according to analysts at JBC Energy Consultancy. President Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran's nuclear program, setting the stage for reinstating economic sanctions.
Recent Selloff: Brent on Friday closed at its lowest level since August, while WTI closed out the day at its weakest point since April. Brent breached the $ 86-a-barrel threshold for the first time in four years.
"And yet increasing numbers of observers believed in early October that the price could climb to $ 100," analysts at
Commerzbank
wrote in a note Monday. "What has happened since then to cause prices to react so differently? One key reason is that OPEC, Russia and the US have stepped up their oil supply considerably. "
Prices also fall under the influence of global economic growth and equity-market turmoil.
INSIGHT
Further Upside ?: Some oil market observers are still optimistic that the US sanctions on Iran and further supply reductions from the Islamic Republic could still turn the oil market bullish before the year is out.
By mid-November, the speculative driven selloff centered on U.S. stock building will have come to an end [and] Iran oil sanctions will be launched in the global inventory in the second half of November, "said Bjarne Schieldrop, chief commodities analyst at SEB Markets.
Moreover, a further slide in Iranian crude exports to one million barrels a day, "according to Tamas Varga, analyst at brokerage PVM Oil Associates Ltd.
AHEAD
The American Petroleum Institute, an industry group, the weekly energy news on Tuesday.
OPEC and its production allies, including Russia, will meet in Abu Dhabi on Nov. 11 to assess their nearly two-year-old agreement to limit production output.
The price of a tank of gas has been rising, and coming from the United States on penalties. But that's not the whole story. WSJ's Sarah Kent explains why global oil prices are on a knife-edge. Photo: Getty Images
Write to Christopher Alessi at [email protected] and Amrith Ramkumar at [email protected]
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