Oil continues to rise amid threats of sanctions against Iran

Oil prices rose to a one-year high on Thursday, while market participants prepared for the possibility of renewed US sanctions against Iran, as the gap between supply and demand in the market narrowed.

The United States plans to impose new sanctions on Iran, which produces about 4 percent of the global oil supplies, after it pulled out of a deal reached in late 2015 and limits Tehran’s nuclear ambitions in return for lifting US and European sanctions.

The Iranian economy has been hit hard by the return of economic sanctions, which will remove Iran from its oil position in the market and threaten its market share, while the oil supply is still going to further contraction. OPEC and its independent allies have agreed to reduce production in exchange for continued growth in demand and the inability of successive US supplies as an attempt to compensate for the shortage of oil supplies from traditional producers.

Oil prices rose strongly after the announcement of the new measures. Global Brent crude futures were at their highest since November 2014, at $77.89 a barrel, up 0.9% from the previous session. US West Texas Intermediate crude futures also reached their peak since November 2014, at $71.84 a barrel, before falling to $71.78 a barrel, but still seeing a 0.9% increase.

The US Energy Information Administration reported that crude oil inventories in the United States fell more than expected. Crude oil inventories fell by 2.2 million barrels in the week ending May 4, compared to analysts’ forecasts, which were for a 719,000 bpd drop. Crude oil at the Cushing’s delivery center in Oklahoma increased by 1.4 million barrels, while refinery crude oil consumption fell by 75,000 barrels per day. Refinery operating rates fell 0.7 points, the department said.

The US Forbes report confirmed that President Donald Trump is firmly convinced that the United States will not yet be party to the so-called Iranian nuclear deal, pointing out that the decision means that Washington will soon impose tougher sanctions on Iran. As a result, it is almost certain that Iran will find it difficult to sell its crude oil to world markets, pointing out that crude oil is the main and vital source of foreign currency to Iran, which means that the American position will be to adopt severe economic sanctions.