Oil prices broke through the significant barrier of $80 a barrel in trading on Thursday as President Donald Trump’s decision to pull out of the Joint Comprehensive Plan of Action (JCPOA) and to reinstate US sanctions on Iran began to resonate more strongly through the markets.
The price of Brent crude has now risen more than 50% since September 2017 with experts speculating that the sanctions placed upon Iran’s oil industry could block hundreds of thousands of barrels of supply from entering the global market. The spike in prices also comes as French supermajor Total virtually confirmed its withdrawal from its big ticket project at Iran’s vast offshore South Pars gas field due to the likely impact on its business of punitive measures by the US administration if it persevered with its deal with Tehran.
The ongoing impact of the output cuts led by Saudi Arabia and Russia, which already comprise around 1.8mn barrels of reduced supply, is beginning to bite more noticeably as the summer months approach and the US is set to commence its driving season when gasoline usage is traditionally at its annual peak. US inventories have been gradually declining due to the sustained production scale-back by a cartel of 24 nations.
Although US oil production, driven forwards by its prodigious tight oil industry, is alleviating much of the shortfall and American rig counts are at three-year highs, longer-term the ongoing geopolitical uncertainties in the likes of Iran, elsewhere in the Middle East as well as the economic dysfunction currently evident in Venezuela is fanning concerns over supply.
Meanwhile the price of West Texas Intermediate light sweet crude hit four-year highs on Thursday pushing through $72 a barrel.
