Oil Market Shrugs Off Iran Sanctions, Is Trading Up in Early February
With global oil supply tightening, oil traders aren’t too concerned about new sanctions on Iran.
By Brian O’Connell, TheStreet
New York Mercantile Exchange crude oil prices were up for the first week in February, and that positive trend has continued on Monday, with March futures trading opening at 53.81. April oil futures are also up, to 54.48, while May futures are trading at 54.99.
With the Trump administration’s move to sanction Iran last week, which produces about 3.4 million barrels of oil per day, energy traders might have pulled back. But that didn’t happen, as investors opted for optimism, as signs that global oil supply is tightening.
Still, the Iran situation bears watching. Only a day before the sanctions, U.S. officials had put Iran “on notice” over a recent missile test launch. Yet market watchers remain largely unperturbed over the current Iran picture.
“These actions are not likely to cause significant problems unless Iran’s response is more harassment to ships in the Persian Gulf,” notes James Williams, energy economist at WTRG Economics, in a research note.
“While there is always the possibility of new or further geopolitical risks arising, the market will now return its focus to supply and demand,” adds Jenna Delaney, oil analyst with Platts Analytics.
Even as Iran issued a harsh response to the sanctions, industry observers say one key will be to watch Iran’s attitude toward the U.S. and the West going forward.
“I would not expect a large move in oil prices due to the Iran sanctions,” says Ryan Dusek, director at Opportune LLP. “It will be Iran’s response to the sanctions than will be the driver. If they continue to defy the UN and Trump administration, I would expect prices to move up into the $65-68 range due to the pure political uncertainty.”
“Otherwise, I believe we may continue to consolidate in the short term, around the $48 to $50 mark,” Dusek adds. “I believe this is the first of many countries to test the waters of this new administration. This test will set the tone for those who may follow.” Click below to read more…