Crude oil prices surged Monday, hitting new 2019 highs, after the Trump administration announced all oil buyers will have to end imports from Iran, effective May 2, or be subject to U.S. sanctions.
The administration said the State Department will cease granting sanction waivers to any country still importing Iranian crude or condensate, Kallanish Energy reports.
Brent, WTI each up more than 2.5%
Brent crude, the international benchmark for crude prices, settled $2.07 higher at $74.04 a barrel, rising 2.9% for its best closing price since Oct. 31, 2018. Brent rose as high as $74.52/Bbl around midday, blowing past last week’s 2019 intraday peak at $72.27/Bbl.
U.S. West Texas Intermediate crude futures settled $1.70 higher, at $65.70/Bbl, surging 2.7% to a nearly six-month closing high.
WTI earlier Monday rose as high as $65.92/Bbl, the strongest level since Oct. 31, 2018. WTI had been trading sideways for roughly two weeks after peaking at $64.79/Bbl earlier in the month.
The U.S. reimposed sanctions last November on exports of Iranian oil after President Trump pulled out of a nuclear accord struck in 2015 between Iran and world powers.
Washington, however, granted eight of Iran’s largest oil importers exemptions that allowed them limited purchases for an additional six months.
The eight buyers include China and India (Iran’s biggest customers), as well as Japan, South Korea, Turkey, Italy, Greece, and Taiwan. The waivers have allowed Iran to continue exporting roughly 1 million barrels per day (Mmbpd), down from roughly 2.5 Mmbpd last year.
The decision to end the waivers comes as a crude oil glut is draining from the international oil market following the latest production cuts by Opec+. A group of producer-nations that includes most of Opec, along with a number of non-Opec countries led by Russia.
Pompeo touts Saudi Arabia, UAE
Saudi Arabia, the top oil exporter, is spearheading Opec+’s plan to keep 1.2 Mmbpd off the market.
During a press conference Monday morning (monitored by Kallanish Energy), U.S. Secretary of State Mike Pompeo said the Saudis, along with the United Arab Emirates would “take timely action to assure that global demand is met as all Iranian oil is removed from the market.”
The U.S. continues to ratchet up its crude production, with exports growing almost weekly.
Kingdom will ‘coordinate’
Brent prices have risen by 38% and U.S. crude is up nearly 45% this year following a collapse in the cost of crude in the final months of 2018.
Saudi Energy Minister Khalid al-Falih said the kingdom will “coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance.”
“In the next few weeks, the Kingdom will be consulting closely with other producing countries and key oil consuming nations to ensure a well-balanced and stable oil market, for the benefits of producers and consumers as well as the stability of the world economy,” Falih said in a statement.
India could suffer the most
Opec+ members are scheduled to meet at the end of June to decide whether to lift the production caps or continue suppressing output.
Of the buyers of Iranian oil, India could suffer the most from Washington’s move, said Daryl Liew, head of portfolio management at financial services company Reyl Singapore.
This post appeared first on Kallanish Energy News.