On Monday, oil prices soared to its highest level since November 2014 ahead of next month’s sanctions November 4, on Iran by the U.S.
Brent on the London based ICE Futures Europe exchange for December settlement gained 1 cent to $84.99 a barrel. The looming deadline of sanctions, supported the rise in prices.
U.S. West Texas Intermediate crude futures gained 19 cents or 0.3 percent at $73.44 a barrel. On the New York Mercantile Exchange it was trading at $75.59 a barrel, rising 29 cents for November delivery. Friday’s report that there was a slowdown in U.S. crude production, with a stagnation in rig counts in the U.S. was supported by the rise in WTI prices.
Losses from crude supply from Iran and Venezuela continues to rattle global markets with crude rallying around 16 percent since mid-August.
The biggest buyer of Iranian oil is China, news reports that Chinese, Sinopec have said that they would be halving Iranian crude oil loadings this month. This is another clear indication on the impact that U.S. sanctions will have on Iran.
On Sunday commodity analyst at Emirates NBD Bank, Edward Bell said that the markets are likely to tighten if the Chinese refiners comply more fully than expected with U.S. sanctions.
Head of trading at Oanda futures brokerage in Singapore, Stephen Innes said that approximately 1.5 million barrels of Iranian oil per day will effectively go offline when sanctions come into effect on Nov.4. He went on to say that it is reasonable to expect oil prices to rocket to $100, if capacity of Saudi Arabia is tapped out at 10.5 million bpd.
Innes was commenting on news reports that President Donald Trump had been in contact with Saudi Arabia’s King Salman where they had discussed various ways to maintain supply when sanctions hit Iran’s exports.
High fuel import costs and soaring oil prices and the weakening currencies in Asia’s emerging markets are of concern on the inflationary effect it will have on demand growth.
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