Impact of United States sanctions on the tanker market

Marco Green
November 17, 2018

Since October, the oil price has fallen to below $70 a barrel, its lowest in eight months.

But when President Donald Trump imposed sanctions November 5, he issued six-month waivers for some of Iran's biggest oil customers.

West Texas Intermediate for December delivery advanced 87 cents to $57.12 a barrel at 11:31 a.m. on the New York Mercantile Exchange.

He said the increase in shortage and price of crude oil is expected to occur in the event that the sanction continued, adding that the issue is going to impact tremendously on the earnings of Nigeria, which relies on revenues from oil to sustain itself. Total volume traded was about 58 per cent above 100-day average.

As of 20:39 GMT, the Brent blend futures based on the light North Sea crude oil depreciated by 7.43 percent to $64.91 per barrel. The global benchmark crude was at a $9.88 premium to WTI for the same month.

"Producers...have more barrels than they can sell at the moment", said Mercatus Energy Advisors' Corley.

This week, financial markets caught a bit of a break, when speculation mounted that Saudi Arabia would lead OPEC+ (the Organization of Petroleum Exporting Countries plus Russian Federation and other allies) to lead a million-barrel production cut in coming months.

Brent was trading at $65.54 a barrel, following its largest one-day loss since July 2018.

In other words, the biggest wonder about oil prices isn't why they're so low now, but rather why they were so high before.

Trump appeared to criticize the announcement in a Monday tweet: "Hopefully, Saudi Arabia and OPEC [Organization of the Petroleum Exporting Countries] will not be cutting oil production". Analysts predict a rise of 3.2 million barrels, according to a Bloomberg survey.

One month ago, the International Energy Agency (IEA) warned that the world was "straining parts of the system to the limit", noting that "recent production increases come at the expense of spare capacity", and that the "strain could be with us for some time and it will likely be accompanied by higher prices".

He urged the Federal Government to put in place measures to improve oil production, adding that OPEC will soon exempt Nigeria from crude oil cut imposed on the country and Libya since previous year.

Other oil-market news: OPEC and allied oil producers will cut or adjust production as needed to balance the market, the group's president, United Arab Emirates Energy Minister Suhail Al Mazrouei, said on Wednesday.

Once the oil industry's star product, gasoline is now losing oil refineries money in Europe and has plunged in value against diesel, its main competitor.

Crude prices are influenced by several variables such as speculation on oil trades (known as futures), inventory levels, geopolitics, global economic growth and the relationship between global supply and demand. Contributions of 200 words or more will be considered for publication.

Other reports by Click Lancashire

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