Oil price steady as US sanctions on Iran begin to bite

Oil price steady as US sanctions on Iran begin to bite

The oil price is holding pretty steady at just below four-year highs, Friday, amid fears that supply will tighten more than expected, ahead of the firm imposition of US sanctions against Iran. The oil price has been mixed in recent days, with a bias to the upside, amid increased fears hat the incoming sanctions will limit the oil supply by more than anticipated.

By around 1400 BST, the price of Brent Crude oil was off a little at $84.41 per barrel. The price of US WTI crude oil, meanwhile, was marginally higher at $74.51 per barrel.

Oil supply fears remain

The more stable oil price Friday follows a pull-back Thursday after figures showed US oil stock inventories rose by more than expected. Reports said that US oil inventories at Cushing, Oklahoma, rose by 1.7 million barrels.

However, despite that development, many analysts are continuing to expect that when the sanctions are fully in place, it will lead to a shortfall of some 1 million barrels, per day.

That’s a situation that would be easily exacerbated by any disruptions to supply in other major oil exporting countries.

So, while there may be enough oil available to meet demand, spare capacity of the valuable commodity will likely shrink, as the sanctions ensure most oil importers look elsewhere for their supply.

Could high oil price stymie demand?

As fears over a lack of supply of oil is pushing the price of the black stuff higher, there is another outlook in play. If the price of oil price too far, global demand for it could suffer as countries look to alternative options for their plans.

And, if demand for oil falls, then its value will come down too.

This is something that US President Trump says he is keen to happen and he has called on OPEC to help make the price of oil lower. The US is now among the world’s largest oil producers and a lower oil price would have a broad effect there.

By Ilona Billington
Ilona is a freelance writer and editor with over 15 years experience reporting and writing about UK and European economics, real estate, financial markets and central banks.
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