A report out by the Wall Street Journal predicts that Iran’s oil exports will drop more than a third next month which is bound to hit supply chains hard and drive up the price and some say this figure is overly optimistic and the countries exports will drop even further in the months ahead.
In the last round of sanctions the US introduced against Iran a few years ago, some countries were granted exemptions and where still able to accept Iranian imports but this time around US president Donald Trump is expected to take a stronger stance and demand all countries refrain from importing Iranian oil.
Any country that fails to comply is likely to see some form of economic sanctions from the US against themselves.
“The November deadline to comply with the U.S. demands for an Iran oil embargo is moving closer,” said Norbert Rücker, head of macro and commodity research at Julius Baer. “In anticipation, buyers seemingly have begun reducing their purchases. This embargo is the oil market’s uncontrollable wild card.”
Even before the sanctions have been introduced some countries out of Europe have begun preparing for the upcoming sanctions by reducing the amount of oil they import which can explain the recent rally and some analysts predict that oil will be back around the $80 mark before too long.
“The overall situation is that U.S. sanctions toward Iran are now increasingly kicking in, which will help to dry up the physical crude oil market and place it back into solid backwardation,” said SEB head of commodities Bjarne Schieldrop.
“This will shift the frontend Brent crude oil price into the higher $70s range with a touch of $80s.” he added.