Oil creeps up ahead of Iran sanctions

OIL EDGED higher yesterday, driven by the prospect of a shortfall in global supply once US sanctions against major crude exporter Iran come into force in just five weeks’ time.

US President Donald Trump this week demanded that OPEC (Organization of the Petroleum Exporting Countries) raise production to prevent further price rises ahead of key congressional elections in early November.

Analysts say OPEC and partner Russia appear unlikely to respond immediately to Trump’s demands, while US energy secretary Rick Perry has also ruled out using US strategic crude reserves as a means of lowering the price.

Analysts’ estimates of how much Iranian crude could disappear from the market once US sanctions come into force on November 4 vary widely, from 500,000 barrels per day (bpd) to 2 million bpd.

At its 2018 peak in May, Iran exported 2.71 million bpd of crude oil – nearly 3 per cent of daily global consumption.

OPEC has little spare capacity to make up for any drop in exports from Iran, which is the group’s third-largest producer.

However, Saudi Arabia will quietly add extra oil to the market over the next couple of months to offset the Iranian shortfall, but is worried it might need to limit output next year to balance global supply and demand as the United States pumps more crude.