Oil rises as US renew sanctions against Iran

Marco Green
August 7, 2018

Brent crude and West Texas Intermediate both started the day today with only moderate gains despite the return of US sanctions against Iran that will take effect at 12:01 a.m.

Crude oil prices are catching some lift in the week's early trading, with WTI barrel prices pushing over the 68.75 level as Saudi output begins to slide while United States drilling efforts stall out.

US West Texas Intermediate (WTI) crude futures were up 20 cents, or 0.3 per cent, at $69.21 barrel.

The reimposed sanctions target Iran's USA dollar purchases, metals trading, coal, industrial software and its auto sector.

The alternative-Iran's government agreeing to all USA demands such as putting an end to its participation in regional affairs, support for the Yemen Houthis, Hamas, and Hezbollah, and "meddling" in Syria-remains within the realm of fantasy.

President Donald Trump tweeted on Tuesday that the sanctions were "the most biting sanctions ever imposed".

Iranian oil importers from China to Europe are not too happy with the USA course of action, but Washington has once again reiterated its intention to see Iranian oil exports squeezed out completely by November 4.

"A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices", the analyst added.

Much of the northern hemisphere has been gripped by extreme heat this summer, pushing up demand for industrial and residential cooling.

"The US seems hell-bent on regime change in Iran", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

But US bank JPMorgan said a warmer-than-usual fourth quarter could stem from a potential El Niño weather pattern that "can cause droughts, flooding and other natural disasters across the globe, including heatwaves in the US that affect commodities".

"Past instances of El Niño have resulted in sharp drops in USA residential and commercial heating oil demand and prices", it said.

Other reports by Click Lancashire

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