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

Queen Charlotte crackdown

RCMP target impaired driving amidst rising numbers of the offence

Australian gold mining giant acquires Red Chris mine

Newcrest now owns 70 per cent of the mine south of Iskut and operatorship

Haida Gwaii storm causes B.C. ferry delay

Skidegate to Prince Rupert route affected

Rainfall warning for Haida Gwaii

High winds also expected to hit the islands

Haida Gwaii eagles recovering in Ladner care facility

Treatment for the eagles is both costly and time intensive

Bodies of two missing Surrey men found near Ashcroft

Ryan Provencher and Richard Scurr have been missing since July 17

Five hedgehogs quickly adopted after being left at BC SPCA

Lucky new owners picked up their pets from Maple Ridge branch on Aug. 20

B.C. cricket players get interrupted by racist remark

Community has had protocols in place for years to respond to prejudice

Groovy B.C. wedding a throwback to Woodstock ‘69

Couple hosts themed wedding 50 years after legendary festival

Nearly 50% of Canadians experience ‘post-vacation blues’: poll

48 per cent of travellers are already stressed about ‘normal life’ while still on their trip

More women may need breast cancer gene test, U.S. guidelines say

Recommendations aimed at women who’ve been treated for BRCA-related cancers and are now cancer-free

B.C. manhunt suspects left cellphone video before they died: family

Family member says Kam McLeod, Bryer Schmegelsky recorded final wishes

Most Read