Oil strong as U.S. decision on Iran sanctions looms
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[May 04, 2018]
By Christopher Johnson
LONDON (Reuters) - Oil prices strengthened
on Friday but stayed below recent highs as global supplies remained
tight and the market awaited news from Washington on possible new U.S.
sanctions against Iran.
Brent crude oil was up 30 cents at $73.92 a barrel by 1110 GMT. The
benchmark contract hit a 3-1/2 year closing high of $75.17 on Monday.
U.S. light crude was 30 cents higher at $68.73.
"The energy complex is entering a consolidation phase as a wait-and-see
approach takes hold ahead of next week's Iranian sanctions waiver
deadline," said Stephen Brennock, analyst at London brokerage PVM Oil
Associates.
"Expectations that the United States will pull out of the (Iran nuclear)
deal and refrain from extending sanctions relief are keeping both crude
markers near three-year peaks," he added.
ANZ analysts Daniel Hynes and Soni Kumari said Brent could reach $80 a
barrel by the end of this year, attributing recent strength to rising
geopolitical risks and tighter global supply.
"We expect the market to tighten even further in second half 2018," they
wrote in a note to clients.
Investors are concerned that sanctions against Iran could cut oil
supplies.
Iran's foreign minister said on Thursday that U.S. demands to change its
2015 nuclear agreement with world powers were unacceptable as a deadline
set by President Donald Trump for Europeans to "fix" the deal loomed.
Trump has said that unless European allies rectify the "terrible flaws"
in the international accord by May 12, he will refuse to extend U.S.
sanctions relief for the oil-producing Islamic Republic.
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Oil pumpjacks are seen near Aneth, Utah, U.S., October 29, 2017.
REUTERS/Andrew Cullen/File Photo
"Prices reflect a premium for Iran uncertainties. Investors are worried about
supplies after Iran took a tough stance in its response to the United States,"
said Wang Xiao, head of crude research with Guotai Junan Futures.
European powers still want to hand Trump a plan to save the Iran nuclear deal
next week. But they have also started work on protecting EU-Iranian business
ties if the U.S. president makes good on a threat to withdraw.
Iran resumed its role as a major oil exporter in January 2016 when international
sanctions against Tehran were lifted in return for curbs on Iran's nuclear
program.
Aside from security concerns, growing U.S. crude supplies are capping price
gains.
Surging production in the Permian shale basin is outpacing pipeline capacity,
while local refining issues have exacerbated oversupply in the region.
The United States now produces more crude oil than top exporter Saudi Arabia.
(Additional reporting by Meng Meng in BEIJING and Henning Gloystein in
SINGAPORE; Editing by David Evans and Edmund Blair)
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