Goldman Sees Oil Exports Giving US Leverage in Iran Sanctions

July WTI Crude Oil

Oil prices rose on Monday (May 14) as Opec reported that the global oil glut has been virtually eliminated, while U.S. crude's discount to global benchmark Brent widened to more than US$7, its deepest in five months. The multinational organization was established seven years after a USA -backed coup ousted the democratically elected Iranian Prime Minister Mohammed Mossadegh, who advocated for nationalizing the country's oil industry-a move deeply opposed by the United Kingdom and other Western powers.

OPEC on Monday forecast that USA drillers will account for most of the growth in oil production this year but warned that the global economic growth picture is clouded by uncertainty, in part due to American trade policy and sanctions.

"Russian and Chinese firms in particular may still be willing to invest in Iran, but if sanctions result in excess capacity at existing fields, there will be little economic rationale to support new developments".

President Donald Trump ordered the federal government to significantly reduce the amount of petroleum and petroleum products purchased from Iran.

The OPEC's report also put Iran's oil output, based on direct communication, in the mentioned month at 3.804 million bpd, near 2,000 bpd fall from 3.806 million bpd in the previous month.

OPEC figures published on Monday showed oil inventories in OECD industrialized nations in March fell to 9 million barrels above the five-year average, from 340 million barrels above the average in January 2017.

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'The last time oil was this expensive was in November 2014 when prices were falling due to Opec's decision to oversupply the market. It pointed specifically to new sanctions on Russian Federation, tariffs on Chinese goods and steel and aluminum imports, continued trade negotiations with China and NAFTA and President Donald Trump 's decision to withdraw from the Iran nuclear deal last week.

Oil and gas prices are likely to surge if President Donald Trump takes the US out of a 2015 nuclear agreement with Iran.

Oil prices are staying strong and while they are overbought there seems to be a period of consolidation which signals we should retest the highs again.

The global oil picture has dramatically changed in the past year.

A burn-off flare is seen at the Ceylon Petroleum Corporation's (CPS) Sapugaskanda Oil Refinery in Colombo, Sri Lanka May 11, 2018.

The US is not a member of Opec which accounts for more than 40 percent of the global oil market. Traders could anticipate additional upward price momentum if the IEA's views come more in line with OPEC. With WTI's price above $70 a barrel, that increase wasn't surprising, ING strategists said in a note. The observations he makes are his own and are not intended as trading or investment advice.

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