The oil market is assuming that Iranian production will be coming offline shortly because of U.S. sanctions.
The oil market is also assuming that Iranian production will not be replaced by U.S. production or by other members of the OPEC cartel. Those are both very big assumptions.
Oil prices hit $80 a barrel on Thursday. This was the first time since November 2014. #Brent crude futures LCOc1 reached an intraday high of $80.18. They were up 58 cents at $79.86 as of 1110 GMT.
President Donald Trump decided this month to withdraw the United States from an international nuclear deal with #Iran. Furthermore, he announced a renewal of sanctions that could limit crude exports from OPEC’s third-largest producer. As a result, this has given strong tailwind to oil prices.
Meanwhile, France’s Total on Wednesday warned it might abandon a multi-billion-dollar gas project in Iran if it could not secure a waiver from U.S. sanctions. This cast further doubt on European-led efforts to salvage the nuclear deal or to resist U.S. sanctions.
Furthermore, a rapid decline in #Venezuela’s crude production has further roiled markets in recent months.
Norbert Rücker is head of macro and commodity research at Swiss bank Julius Baer. “The geopolitical noise and escalation fears are here to stay.” “As a result, supply concerns are top of mind after the United States left the Iran nuclear deal.”
Most noteworthy, global inventories of crude oil and refined products dropped sharply in recent months due to robust demand and production cuts by the world’s top producing countries.