US sanctions against Iran could give oil a boost to $100 amid dramatic shortfall in supplies
The US restrictions targeting Iran come into force on November 4. Oil prices have grown to $82 per barrel as investors are waiting for them. The sanctions come at a time when US President Donald Trump is insisting that OPEC increase oil production to substitute Iranian exports, something that the organization, as well as Russia and other producers, have refused to do.
“The unwillingness of the 25 producing nations to declare their intention to ramp up production in their effort to replace Iranian barrels all of the sudden produced a very tight supply and demand balance for the fourth quarter of this year,” Tamas Varga, senior analyst at PVM Oil Associates, said in a research note quoted by CNBC.
“As a result, the talk is now (of) Brent reaching $100 a barrel this year,” he added.
Estimates of how much Iranian crude could vanish from the market once US sanctions come into force vary widely. The predictions are between 500,000 barrels per day (bpd) to 2 million bpd. In May, Iran was exporting 2.7 million bpd – around three percent of global consumption.
The US is rapidly increasing its production. Last week, it hit a record 11.1 million bpd in the week ending, according to data from the Energy Information Administration (EIA). That is an increase of almost a third since 2016.
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