Iran sanctions send oil prices, supply concerns higher

Experts said the sanctions could potentially remove up to 1.2 million barrels of oil per day

Secretary of State Mike Pompeo speaks during a news conference on Monday, April 22, 2019, at the Department of State in Washington. (AP Photo/Sait Serkan Gurbuz)

The Trump administration’s decision to impose sanctions on countries that buy Iranian oil is raising concerns about global crude supply and sending oil prices to their highest levels since October.

Industry experts said Monday that the sanctions could potentially remove up to 1.2 million barrels of oil per day from international markets. But that number will likely be lower, depending on how countries respond and just how much oil Iran continues to export.

READ MORE: Oil and gas sector applauds new Alberta premier’s many pro-business pledges

President Donald Trump wants to eliminate all of Iran’s revenue from oil exports, money he says funds destabilizing activity in the Middle East and elsewhere.

The announcement primarily impacts Iranian oil importers including China, India, Japan, South Korea and Turkey.

“It’s difficult to imagine all exports being cut off, especially since China is still a major buyer of Iranian crude oil,” said Jim Burkhard, vice-president for oil markets at IHS Markit. “How China responds will go a long way to shape just how much Iranian exports are cut or not.”

To make up for the Iranian losses, Saudi Arabia may increase production that the country had recently trimmed, but it “is going to use up all the spare capacity that they have, or pretty darn close to it, and that is going to leave markets feeling tight,” said Shin Kim, head of supply and production analytics at S&P Global Platts.

Oil prices rose more than 2% Monday, helping to lift some energy stocks.

The price of gasoline in the U.S. was already rising and the development could raise prices further.

“We’ve seen that market tighten up considerably even before the Iranian news, and we’re also seeing a number of refining issues in the U.S.,” said Ryan Fitzmaurice, energy strategist at Rabobank.

Rising oil — and gasoline — prices can squeeze consumers, whose spending accounts for about 70% of U.S. economic output. “They can take a bite out of consumers’ purchasing power,” said Scott Hoyt, senior director at Moody’s Analytics, where he follows consumer economics.

But unless energy prices surge considerably higher, a lot faster, Hoyt said he doesn’t expect them to do much damage to the American economy. Employers are hiring, and the unemployment rate is near a five-decade low of 3.8%.

Rising prices are “coming at a time when consumers are relatively well positioned to handle it,” he said. “Job growth is strong. Wage growth is healthy.” And prices at the pump aren’t even up much over the past year: The AAA reports that U.S. gasoline prices average $2.84 a gallon, compared to $2.76 a gallon a year ago.

___

Paul Wiseman in Washington, D.C. contributed to this report.

Cathy Bussewitz, The Associated Press

Like us on Facebook and follow us on Twitter

Just Posted

Help Cedar Hill Middle School students make a difference in Guatemala this Christmas

Proceeds from Christmas cards made by CHMS go to the Aldea Maya charity

Avoid crowds, support a good cause and start your holiday shopping with Night of Lights event

Event takes place at Hillside Centre on Nov. 17 from 6 to 9:30 p.m.

Sidney considers turning over public charging stations to private company

Councillor questions wisdom of charging for charging

Disturbing sexual, criminal trends with Greater Victoria youth on the rise

Family counsellors see unprecedented rise in youth sexual assaults and exploitation of children

Flurry of Yuletide activities coming to Sidney

Sidney Business Improvement Area Society and members organize festive events

VIDEO: B.C. to restrict nicotine content, bring in 20% tax on vaping products

Province will also restrict candy and fruit flavoured vaping products to adult-only stores

POLL: Do you support CUPE workers in their dispute with School District 63?

SD63 schools to remain closed as strike continues Tuesday

Greater Victoria Crime Stoppers wanted list for the week of Nov. 12

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

Seguin lifts surging Stars to 4-2 win over Canucks

Dallas is 6-0-1 in last seven outings

‘City that protects rapists’: Sexual assault survivor slams Kelowna mayor for defending RCMP

Heather Friesen spent the morning handing out flyers around city hall calling out the mayor

Batten down the hatches: Wet and windy weekend on the way for coastal B.C.

Environment Canada issues special weather warning for Lower Mainland, Vancouver Island

BC Liquor Stores to move fully to paper bags by March

Vancouver Island to be the first to convert to paper bags in November

Tolko shuts B.C. divisions for two weeks over holidays

Head office to close from Dec. 23-27; two weeks’ downtime runs Dec. 21-Jan. 6

B.C. government working with RCMP to address $10 million in budget cuts

Public Safety Minister Mike Farnworth issues statement following report of RCMP cost-cutting

Most Read