Oil prices rose this morning in the wake of the United States’s new get-tough policy on oil from Iran.
Three days ago, Secretary of State Michael Pompeo announced that, as of next week, the US will issue no more waivers to countries importing Iranian crude.
This means that eight countries currently exempt from US sanctions if they buy oil from Iran will face penalties should they continue to do so after 2 May.
“Accelerating our pressure campaign”
Mr Pompeo said: “The Trump Administration has taken Iran’s oil exports to historic lows, and we are dramatically accelerating our pressure campaign in a calibrated way that meets our national security objectives while maintaining well supplied global oil markets.
“We stand by our allies and partners as they transition away from Iranian crude to other alternatives. We have had extensive and productive discussions with Saudi Arabia, the United Arab Emirates, and other major producers to ease this transition and ensure sufficient supply. This, in addition to increasing US production, underscores our confidence that energy markets will remain well supplied.”
The State Department, America’s foreign ministry, added: “Today’s announcement builds on the already significant successes of our pressure campaign.
“We will continue to apply maximum pressure on the Iranian regime until its leaders change their destructive behaviour, respect the rights of the Iranian people, and return to the negotiating table.”
China and Turkey may ignore ban
The move was seen as symbolising a new assertiveness as the US, for decades a massive oil importer, becomes a major player in crude markets. The Economist noted: “As recently as 2015 it was illegal to export oil. Within ten years the shale boom has transformed it into the world’s biggest producer of crude. No longer must it tiptoe around regimes whose policies it detests but whose oil it craves.”
The net effect may be to take oil prices out of the limited range in which they have traded during the past 12 months. On 25 March, a month ago, Brent stood at $67.21 a barrel and WTI changed hands at $59.41 on 27 March,
Three months ago, on 25 January, Brent was worth $61.64 a barrel and WTI $53.69.
Over 12 months, the price of both these benchmark crudes has barely moved. On 25 April 2018, Brent was trading at $74 a barrel and WTI at $68.05.
US sanctions were imposed on Iran at the end of last year as President Donald Trump walked away from a 2015 agreement to allow oil exports in return for tougher controls on the country’s nuclear programme. The move is a source of tension between Washington and Brussels, as the European Union believes Iran has kept its side of the bargain.