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Oil hits 2019 high on U.S. plan to tighten squeeze on Iran

CommoditiesApr 22, 2019 11:23AM ET
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© Reuters. FILE PHOTO: An oil pump jack pumps oil in a field near Calgary

By Stephanie Kelly

NEW YORK (Reuters) - Oil prices jumped more than 2 percent on Monday to a near six-month high, on growing concern about tight global supplies after the United States announced a further clampdown on Iranian oil exports.

Washington said it will eliminate in May all waivers allowing eight economies to buy Iranian oil without facing U.S. sanctions.

"The geopolitical risk premium is back in the oil market, in a big way," said John Kilduff, a partner at Again Capital LLC in New York. "Most, if not all, legitimate commercial interests will avoid Iran oil purchases. Iran's flow will be reduced to a trickle."

Brent crude futures rose $1.77, or 2.5 percent, to $73.74 a barrel by 11:02 a.m. EDT (1502 GMT). The session high of $74.31 a barrel for the international benchmark was the highest since Nov. 1.

U.S. West Texas Intermediate crude futures climbed $1.37, or 2.1 percent, to $65.37 a barrel. The contract hit $65.87 a barrel, the highest since Oct. 31.

In November, the United States reimposed sanctions on exports of Iranian oil but granted waivers to Iran's eight main buyers: China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece. They were allowed to keep making limited purchases for six months.

U.S. Secretary of State Mike Pompeo reiterated that Washington's goal was to bring down exports of Iranian oil to zero and said there were no plans for a grace period beyond May 1.

Iran said the decision not to renew the waivers has "no value" but Tehran was in touch with European partners and neighbors and would "act accordingly," Iranian news agencies reported, citing the Foreign Ministry.

Another drop in Iranian exports would further squeeze supply in a tight market. The United States has also sanctioned OPEC member Venezuela, and the Organization of the Petroleum Exporting Countries and allied producers including Russia have voluntarily cut output, which has helped raise oil prices more than 35 percent so far this year.

Iran's biggest oil customers are China and India, and an end to the exemptions would hit Asian buyers hardest. India hopes Washington will allow allies to keep buying some Iranian oil instead of halting the purchases altogether from May, a source familiar with U.S.-India talks said. [nD8N1SH059]

Trump said Saudi Arabia and other OPEC nations could "more than make up" for any drop in Iranian oil supplies.

Saudi Arabia said it would coordinate with other producers to ensure an adequate crude supply and a balanced market.

Analysts at JBC Energy in Vienna said a Saudi supply boost was likely.

"It is now almost certain that additional volumes from Saudi Arabia from May onwards will come back into the market," JBC said in a report.

Oil hits 2019 high on U.S. plan to tighten squeeze on Iran
 

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Comments (4)
Alec Bean
Alec Bean Apr 23, 2019 12:47AM ET
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OK. My speculation was wrong.  Knowing how irritated Trump is toward high oil price, can this be optics to trick OPEC+ to turn on their taps again?  Making announcement is easy.  Actually enforcing the sanction is a different subject.
Dima Bedin
Dima Bedin Apr 21, 2019 10:56PM ET
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One day Jesus will sanction the USA for all “sanctions ever made” lol. That d be fun
Alex Cunha
Alex Cunha Apr 21, 2019 10:39PM ET
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Let Oil soar. VIX will follow.
Dima Bedin
Dima Bedin Apr 21, 2019 10:26PM ET
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If it is fake Josh d better prepear to visit Jesus
Alec Bean
Alec Bean Apr 21, 2019 10:26PM ET
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Could Trump be setting up this Josh guy to ruin his reputation?  Does anyone know if T has grudges against him?  Total speculation on my part.  I got this haunch because T was able to surprise everyone last time, but the news is surprisingly leaky this time.
Dima Bedin
Dima Bedin Apr 21, 2019 10:26PM ET
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“Surprisingly” - very right word!
 
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