Brent at risk of rising above $85
Uncertainty prevails over how many countries will stop importing oil from Iran
Brent, the international benchmark for crude oil, could to rise above $85 (Dh312) per barrel in the coming months due to a combination of US sanctions on Iran and a potential Opec supply crunch, analysts say.
West Texas Intermediate (WTI), the American crude benchmark, could trade north of $80 per barrel, although it also faces supplyside risks due to the current annual US hurricane season.
“On the whole, the scope, magnitude and broad-scale implications of the reimposition of Iranian sanctions on oil prices has not been fully priced into markets at the current juncture and the uncertainty surrounding the disruptions to Iranian oil supply will continue testing oil markets in the weeks ahead,” Ehsan Khoman, head of Mena Research and Strategy at MUFG Bank, told Gulf News.
When markets closed on Friday, Brent was trading at $78.09 per barrel, down 0.12 per cent whereas West Texas Intermediate was at $68.99 per barrel, up 0.58 per cent with a difference of $9 per barrel between the two.
US President Donald Trump in May announced the reimposition of sanctions on Iran and asked all firms to stop dealing with the Islamic republic or face punitive measures starting from November.
The first batch of sanctions on Iran came into effect last month, with sanctions on oil sales coming into force from November.
However, Jaafar Al Taie, managing director of the UAE-based Manaar Energy Group, said there would be limited impact on oil prices due to sanctions on Iran because of rise in the production from the United States.
“Even if the price rises as a result of US sanctions on Iran, it could fall as a result of a rise in oil production from the US, which has overtaken Saudi Arabia and Russia as the world’s biggest oil producer.”
There is uncertainty on how much Iranian oil is going off the market. “So far, we can see only 30 per cent will be taken off the market with top importer China expected to continue to import. I expect India to cut some imports from Iran but India consumes 500,000 barrels a day of Iranian oil and I don’t expect them to cut all of it,” Al Taie said.