Oil rises as Iran sanc­tions cre­ate worry about sup­ply short­fall

Jef­feries bank warns of record low spare ca­pac­ity with an­a­lysts ex­pect­ing Ira­nian ex­ports to drop by about 1-mil­lion bbl./daily

Zambian Business Times - - COMMODITIE­S - Source: REUTERS

Oil prices crept back to­wards four-year highs on Fri­day as traders an­tic­i­pated a tighter mar­ket due to US sanc­tions on Iran’s crude ex­ports.

Bench­mark Brent crude oil was up 10c a bar­rel at $84.68. On Thurs­day 04 Oct, Brent fell by $1.34 a bar­rel or 1.6%. The contract is on course for a gain of about 2.5% for the week. US light crude was up 30c at $74.63, a gain of more than 2% in a week.

“The mar­ket mood is ex­cep­tion­ally bullish, with fears grow­ing that the US de­mands for an Iran oil em­bargo could cause a sig­nif­i­cant sup­ply short­fall,” said Nor­bert Rücker, head of macro- and com­mod­ity re­search at Julius Bär.

Both bench­marks re­treated on Thurs­day fol­low­ing a rise in US oil in­ven­to­ries and af­ter Saudi Ara­bia and Rus­sia said they would raise out­put to at least partly make up for ex­pected dis­rup­tions from Iran, which is oil car­tel Opec’s third-largest pro­ducer.

But the pull-back did lit­tle to dent a rise of 15% to 20% in oil prices since mid-Au­gust, push­ing them to their high­est since 2014.

Wash­ing­ton wants gov­ern­ments and com­pa­nies around the world to stop buy­ing Ira­nian oil from Novem­ber 4 to put pres­sure on Tehran to rene­go­ti­ate a nu­clear deal.

Many an­a­lysts say they ex­pect Ira­nian ex­ports to drop by about 1-mil­lion bar­rels per day ( bpd). “Ira­nian ex­ports could fall below 1-mil­lion bpd in Novem­ber,” US bank Jef­feries said. “It now ap­pears that only China and Turkey may be will­ing to risk US re­tal­i­a­tion by trans­act­ing with Iran.”

The in­vest­ment bank said there was enough oil to meet de­mand, but “global spare ca­pac­ity is dwin­dling to the low­est level that we can doc­u­ment”.

Spec­u­la­tors have ac­cu­mu­lated bullish long po­si­tions bet­ting on a fur­ther rise in prices amount­ing to al­most 1.2-bil­lion bar­rels of oil. But Gold­man Sachs says the up­wards trend may not last.

“While up­side price risks will pre­vail for now, fun­da­men­tal data out­side of Iran has not turned bullish in our view,” Gold­man said in a note to clients.

“We ex­pect fun­da­men­tals to grad­u­ally be­come bind­ing by early 2019 as new spare ca­pac­ity comes on­line ... point­ing to the global mar­ket even­tu­ally re­turn­ing to a mod­est sur­plus in early 2019.”

Newspapers in English

Newspapers from Zambia

© PressReader. All rights reserved.