Oil prices hit their highest level since November 2014 Tuesday on strong global demand, OPEC’s supply cut agreement and the possibility that US sanctions could be imposed on Iran. Anadarko photo.
Oil prices could rise by $5/barrel if US does not renew Iran sanction relief: Analyst
Oil prices hit highs not seen since November 2014 on Tuesday, but slipped as the session progressed. Despite the slide below Monday’s market, prices continue to be supported by strong global demand, the OPEC supply cut pact and the possibility that the United States will renew sanctions on Iran.
After trading as high as $75.47 on Tuesday, by 2:46 p.m., EDT, Brent crude slipped to $73.17, down 84 cents on the day. US WTI fell 73 cents to $67.78/barrel after reaching levels not seen since November 2014. The Canadian Crude Index was up 4 cents to $50.08/barrel.
Despite the drop on Tuesday, analysts are convinced oil prices will continue to rise.
“Prices are being driven up by tight supply due to high production outages in Venezuela plus the cuts implemented by OPEC and Russia,” Carsten Fritsch, analyst at Commerzbank told Reuters. “What is more, demand appears robust.”
Bob Yawger, director of energy futures at Mizuho agrees. He says rising demand in the US, which is indicated by strong refinery utilization rates, is supporting oil prices.
Uncertainty over the possibility that the United States could renew sanctions against Iran is also underpinning crude prices.
The Trump administration says it will decide by May 12 whether or not it will leave the 2015 nuclear deal with Iran. The deal agreed to by the US, UK, Russia, France, China and Germany lifted crippling economic sanctions on the Middle Eastern country. In return for lifting the sanctions, Iran agreed to limit its nuclear energy program.
President Trump has loudly opposed the agreement, saying the pact was too lenient. Trump argues that Tehran has not lived up to some of the agreement, including heavy-water limits and access to international inspectors.
Speaking with Reuters, Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA, said renewing sanctions against Iran “could push oil prices up as much as $5 per barrel.”
French President Emmanuel Macron and US President Donald Trump met in Washington DC on Monday. Macron was hoping to convince Trump to not leave the pact, which Macron has said is insufficient.
“We want a new accord with Iran,” Macron said at a press conference at the White House on Tuesday.
Macron added a new deal with Iran that would reduce Tehran’s development of ballistic missiles and contain Iran’s involvement in regional wars, and halt its nuclear program.
Possible sanctions against Iran, rising tensions in the Middle East and Venezuelan unrest are all factors in rising oil prices.
“You could get rid of all of these geopolitical headlines —Syria, trade — and if you did that, you would still have a very impressive demand situation in the United States,” Bob Yawger told Reuters.
As well, crude demand in Asia, the world’s largest oil-consuming area, is now at record highs.
Analysts and investors are waiting for weekly data on US crude stocks from the American Petroleum Institute to be released Tuesday afternoon. On Wednesday, the US Energy Information Administration will release government data on US oil inventories.