Oil set to extend long run of weekly gains in tense global market
Opec is expected to raise output and fill supply gap on decline in exports from US sanctions on Venezuela and Iran
Singapore — Oil prices dipped on Friday on expectations that the Organization of the Petroleum Exporting Countries (Opec) will soon raise output to make up for a decline in exports from Iran following a hardening of sanctions on Tehran by the US.
Still, prices are on course for the longest run of weekly gains in years, as oil markets have tightened amid supply disruptions and rising geopolitical concerns, especially over tensions between the US and Iran.
Brent crude futures were at $74.18 per barrel at 5.05 GMT, down 17c, or 0.2%, from their last close.
US West Texas Intermediate (WTI) crude futures were at $64.89 per barrel, down 32c, or 0.5%.
The dip followed Brent’s rise above $75 per barrel for the first time this year on Thursday after Germany, Poland and Slovakia suspended imports of Russian oil via a major pipeline, citing poor quality. The move cut parts of Europe off from a major supply route.
WTI is on track for its eighth successive weekly gain, the longest weekly run since the first half of 2015. Brent is set a fifth weekly price gain, the longest stretch since April 2018.
Oil has been driven up by supply cuts led by Opec and US sanctions on Venezuela and Iran. Crude futures are up about 40% so far in 2019.
“Given the concerns around supply tightening from Libya, Venezuela, and Iran, the short-term view on Brent is bullish,” Fitch Solutions said in a note on Friday.
Washington said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action.
To make up for the shortfall from Iran, the US is pressuring Opec’s de-facto leader Saudi Arabia, as well as allied producers like Iraq and the United Arab Emirates, to end voluntary supply restraints.
“The end of the US waivers on Iran exports will be offset by higher core-Opec and Russia and as a result we do not expect further price upside, even if volatility is likely to increase in coming months,” US bank Goldman Sachs said.
Jefferies bank said “a drop to 500,000 to 600,000 barrels per day [bpd] now seems realistic” for Iranian oil exports, adding that “at least China and potentially India and Turkey will continue to import Iranian crude”.
“Opec will make up for the shortfall,” the US investment bank said.
Despite US efforts to drive Iranian oil exports down to zero, many analysts expect some oil to still seep out of the country.
“A total of 400,000 to 500,000 barrels per day of crude and condensate will continue to be exported,” said energy consultancy FGE, down from about 1-million bpd currently.
China, the world’s biggest buyer of Iranian oil, this week formally complained to the US over its unilateral Iran sanctions.