Brent crude oil futures at one point touched their highest since November 2014 at $76.75 per barrel. FILE PHOTO | NMG
Oil prices rose more than 2 per cent on Wednesday, with Brent
hitting a 3-1/2-year high, after US President Trump abandoned a nuclear
deal with Iran and announced the “highest level” of sanctions against
the OPEC member amid an already tight market.
Ignoring
pleas by allies, US President Donald Trump on Tuesday pulled out of an
international nuclear deal with Iran that was agreed in late 2015,
raising the risk of conflict in the Middle East and casting uncertainty
over global oil supplies.
Brent crude oil futures at
one point touched their highest since November 2014 at $76.75 per
barrel. They were still at $76.62 per barrel at 0653 GMT, up $1.77, or
2.4 percent, from their last close.
US West Texas
Intermediate (WTI) crude futures were up $1.51 per barrel, or 2.2
percent, at $70.57 a barrel, near highs also last seen in late 2014.
In China, the biggest single buyer of Iranian oil, Shanghai
crude futures hit their strongest in dollar terms since they were
launched in late May, around $73.20 per barrel.
Analysts said the soaring prices were the result of an expected fall in Iranian oil exports.
“Iran’s
exports of oil to Asia and Europe will almost certainly decline later
this year and into 2019 as some nations seek alternatives in order to
avoid trouble with Washington and as sanctions start to bite,” said
Sukrit Vijayakar, director of energy consultancy Trifecta.
Iran
re-emerged as a major oil exporter in 2016 after international
sanctions against it were lifted in return for curbs on its nuclear
program, with its April exports standing above 2.6 million barrels per
day (bpd).
That made Iran the third biggest exporter of
crude within the Organization of the Petroleum Exporting Countries
(OPEC), behind Saudi Arabia and Iraq.
Walking away from
the deal means that the United States will likely re-impose sanctions
against Iran after 180 days, unless some other agreement is reached
before then.
ANZ bank said Trump’s decision “puts into
place a scenario that could see the crude oil market tighten
significantly in H2 2018 and into next year”.
Seeking alternatives
Several refiners in Asia said they were seeking alternatives to Iranian supplies.
“There
are worries that Iran’s oil exports could fall by about 1 million
barrels per day (bpd) from current levels,” said Tomomichi Akuta, senior
economist at Mitsubishi UFJ Research and Consulting in Tokyo.
“The
oil supply/demand balance is roughly in balance now, but it could turn
to a complete supply shortage (in case of new supply curbs). Oil prices
could rise at least $10 (a barrel), with Brent approaching near $90,”
Akuta said.
All key crude oil futures contracts saw
traded volumes jump as speculators took on new positions in the hope of
profiting from rising prices while refiners hedged to protect themselves
from higher feedstock oil prices.
Stephen Innes, head
of trading for Asia-Pacific at futures brokerage Oanda in Singapore,
said the soaring volumes were “causing clearing delays”.
Trying
to ease market concerns, Saudi Arabia on Wednesday said it would work
with other producers to lessen the impact of any shortage in oil
supplies. The country has been leading efforts since 2017 to withhold
production to prop up prices.
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