Published: Tue, May 08, 2018
Business | By Pearl Harrison

Iran fears send US oil above $70 for first time since 2014

Iran fears send US oil above $70 for first time since 2014

Iran has re-emergedas a major oil exporter in 2016 after worldwide sanctions against it were lifted, and Trump has a May 12 deadline to determine whether to extend sanction waivers.

West Texas Intermediate (WTI) oil for delivery next month climbed as much as US$0.97 to US$70.69 a barrel on the New York Mercantile Exchange, and traded at $70.41 at 2:53pm in Singapore.

It was last at $70.30 by 3:05AM ET (0705GMT), up 58 cents, or around 0.9%.

But US output has soared by more than a quarter in the past two years to 10.62-million barrels per day and is likely to rise further in 2018 as energy companies keep drilling.

The United States has questioned Iran's sincerity in implementing the nuclear curbs and President Donald Trump has threatened to reimpose sanctions if adjustments are not made to the agreement.

First, Oil Minister Bijan Zanganeh said over the weekend that Iran was all for a "reasonable" oil price, suggesting the current price level is unreasonable and the result of "manufactured tensions".

Persistent fears that President Donald Trump will pull out of the Iran nuclear deal later this week have played a pivotal role behind the price of US crude oil rising above $70 for the first time since November 2014 during early morning trading.

USA gasoline and product prices will also rise. The global benchmark crude, which is also on course for the highest close since November 2014, was at a US$5.29 premium to July WTI.

While refusing to reveal what he will do on Saturday, Trump reiterated his belief the existing accord is "a terrible agreement for the United States", but "that doesn't mean I wouldn't negotiate a new agreement".

Oil markets were steady on Monday, with prices near late-2014 highs as a decision looms on whether the United States walks away from a deal with Iran and instead re-imposes sanctions on Tehran.

Shannon Rivkin, investment director of Australia's Rivkin Securities, said that oil prices had been driven up "thanks to growing concerns over the economic collapse of Venezuela and its oil industry, plus possible new sanctions against Iran from the Trump administration".

Meanwhile, the US' European allies continue to back the deal, saying it has been essential to reining in Iran's nuclear program. Beyond Venezuela's woes, Greg McKenna, chief market strategist at futures brokerage AxiTrader, said "the big story this week is going to be about oil and the Iran Nuclear deal". A recent report by the International Energy Agency shows that global demand expanded by 1.5 million barrels per day previous year, representing a 1.6 per cent annual increase.

Since sanctions were eased in January 2016, Iran's crude production has almost doubled, while exports last month soared to record levels.

Data from Baker Hughes last Friday showed that the number of active oil-drilling rigs in the USA - a proxy for activity in the sector - rose by nine to 834 last week.

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