Oil analyst says Iran sanctions 'will create market opportunities' for Saudi Arabia

Ivan Schwartz
May 15, 2018

On Tuesday, U.S. President Donald Trump said that the United States would withdraw from "an unacceptable Iran deal", re-imposing sanctions on Tehran that "target critical sectors of Iran's economy, such as its energy, petrochemical, and financial sectors". "Oil prices could rise at least $10 (a barrel), with Brent approaching near $90", Akuta said.

The deal is set to expire at the end of 2018, but the Bank of America analysts said that OPEC and Russian Federation are likely to continue working together to prevent prices from falling.

Brent crude was down 5 cents at $77.07 a barrel by 0920 GMT.

Three OPEC-connected sources told Reuters that the Organization of the Petroleum Exporting Countries member states are in no rush to lay out the decision addressing the need to pump additional oil to compensate for the expected decline in Iranian exports following the U.S. re-imposition of harsh economic sanctions.

West Texas Intermediate crude for June delivery traded 24 cents lower at $70.46 a barrel on the New York Mercantile Exchange at 2:37 p.m.in Singapore.

"With prices moving close to $US80 a barrel and with a great opportunity presented to Saudi Arabia and Russian Federation to regain market share without crashing the oil price, we think there is a good chance the current OPEC+ deal will end by the end of 2018, if not before".

Investors are anxious that renewed sanctions on Iran, a major oil producer, could lead to supply disruptions.

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Trying to ease market concerns, Saudi Arabia on Wednesday said it would work with other producers to lessen the impact of any shortage in oil supplies.

A loss of 500,000 bpd of Iranian crude oil supply would push up oil prices by around $6.20 a barrel, according to Goldman Sachs.

"President Trump has already stepped up pressure on OPEC to end supply cuts due to higher United States gasoline prices looming", Citi analysts said.

The production growth may be far from over, contributing to US crude's discount to Brent, analysts said.

However, RBC Capital Markets head of commodity Helima Croft was much less bullish on future oil prices.

The OPEC report said oil inventories in OECD industrialised nations in March fell to 9 million barrels above the five-year average, down from 340 million barrels above the average in January 2017.

US light crude CLc1 was down 66 cents at $70.70, off a 3-1/2 year high of $71.89 it hit on Thursday.

Other reports by GizPress

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