Oil hits $77 as supplies shrink amid Iran deal row

May 10th, 2018

Brent crude oil rose above $77 per barrel in trading on Wednesday as a combination of decline in American stockpiles and fears over possible sanctions on Iran oil sales grew.

WTI also surged past $71 for the first time since 2014.

Futures in New York rose as much as 3.2 percent a day after U.S. President Donald Trumpa��s said hea��s withdrawing from the deal that allowed the OPEC producer to boost exports, and pledged new sanctions. At the same time, a U.S. government report showed the biggest crude inventory drop since March.

Trump a�?coming forward and not renewing the deal and adding sanctions back obviously is very constructive for crude oil prices. Geopolitical issues are dominating the news flow here recently, which has put a bid under crude,a�? said Nick Holmes, an analyst at Tortoise in Leawood, Kansas, which manages $16 billion in energy-related assets. Todaya��s a�?pretty constructive inventory report out of the U.S. is also supportive.a�?
Sanctions on Iran will be re-instated after wind-down periods of 90 or 180 days, according to the U.S. Treasury. Goldman Sachs Group Inc. sees an upside risk to its oil price forecast after Trumpa��s actions on Iran at a time when there are risks in Saudi Arabia and Venezuela and inventories are at low levels.

a�?What it comes down to is, sanctions will be imposed, how sharp will the teeth of the sanctions be? That is emerging and still unknown,a�? said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. a�?Regardless of what path of extremity occurs in the enforcement of new sanctions, even if ita��s very limited, you have to consider this market to be rather bullish.a�?

West Texas Intermediate crude for June delivery advanced $1.96 to $71.02 a barrel at 11:32 a.m. on the New York Mercantile Exchange. Total volume traded Wednesday was about 32 percent above the 100-day average.

Brent for July settlement climbed $2.21 to $77.06 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $6.09 premium to July WTI. (Bloomberg)

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