Logo of Phnom Penh Post newspaper Phnom Penh Post - Oil market on alert as Iran sanctions hit

Oil market on alert as Iran sanctions hit

Oil market on alert as Iran sanctions hit

US sanctions against importers of Iranian oil threaten the crude oil market’s precarious balance and risk surging prices, all under Saudi Arabia’s watchful gaze, according to experts.

“In the next weeks all eyes will be on Iranian exports, whether there will be some cheating around US sanctions, and on how quickly production will fall,” said Energy Aspects analyst Riccardo Fabiani.

The US will from Monday target buyers of Iranian oil in order to deprive Tehran of its main source of income.

Going after Iran’s oil money will hit Tehran where it hurts, but it also means hitting a major pillar of the global oil market – Iran is the Opec cartel’s third-largest producer – with major consequences for world supply.

Iran exported the equivalent of 2.5 million barrels per day (bpd) in April, before the announcement of sanctions turned buyers away.

“Even if the US grants exemptions, Washington will demand that the volume imported from Iran be significantly reduced,” said UBS analyst Giovanni Staunovo, who expects prices to rise.

However, oil prices have fallen by nearly $15 in less than a month, after peaking in early October at their highest level in two and a half years, with a barrel of Brent at over $85.

Part of the explanation lies in the ambiguous position of the US, which initially insisted that the sanctions were designed to reduce Iranian exports to zero barrels, but has since has softened its position.

Secretary of State Mike Pompeo on Friday announced exemptions for eight countries, without naming them.

Turkey indicated that it was one of them and analysts believe that India, one of the world’s largest importers, is also on the list, which will be published on Monday.

“India said to the US that they can’t stop before March, they are facing a major currency crisis,” explained Joel Hancock, analyst at Natixis.

Consumer confidence in the US itself could also suffer if rising oil prices translate into higher prices at the pump.

“If prices start to rise again or another major producer has difficulties, it could put pressure on the US and lead to new exemptions,” said Fabiani.

Saudi Arabia, the world’s largest exporter, has claimed that it can respond to the Iranian shortfall, but some market players are wondering whether the kingdom is exhausting its capacities.

“Saudi Arabia can produce 12 million barrels a day, but only if it invests,” said Hancock, noting that the country currently produces just under 11 million bpd.

He believes that Riyadh can currently only rely on 300,000 bpd of spare capacity, the extraction of which can be launched in fewer than 30 days.

The US, which is in the process of becoming the world’s leading producer thanks to its shale oil operations, could meet part of the demand, but lacks export capacity, said the analyst.

MOST VIEWED

  • Over $3M in traffic fines collected in two months

    Traffic police officers collected over $3 million in fines throughout the Kingdom during the past two months when officers strictly enforced the law in accordance with a May sub-decree, officials said. As incentives, law enforcement officers received between 200,000 and two million riel ($50 to $500) each. The figures

  • More than 10,000 workers suspended

    More than 10,000 workers at 18 factories in Svay Rieng province have been suspended because of Covid-19, said provincial deputy governor Ros Pharith. Home to 11 special economic zones, Pharith said Svay Rieng has not been spared as the pandemic takes a toll on the global economy. “There

  • Nod given for school exams

    The Ministry of Education, Youth and Sport announced that State-run higher educational institutions can hold examinations to end the academic year, while private schools can organise grade 9 and grade 12 examinations at their premises for two days. However, private institutions have to take measures to prevent

  • Oz lauds Kingdom’s passage of money laundering laws

    In a press release published by the Australian embassy in Phnom Penh on Monday, the country applauded Cambodia’s stance on transnational crimes as well as its promulgation of an anti-money laundering law and a law on combating proliferation financing. The praise came after King

  • Lotus face masks designed to cover globe

    A French designer in Cambodia has produced ecological face masks from lotus fibre to supply local and international markets with an eye on preserving ancestral techniques and supporting Cambodian women in rural communities. During a trip to Asia, Awen Delaval, an eco-friendly fashion designer, was

  • Accused not treated equally, says CCHR

    The Cambodia Centre for Human Rights (CCHR) has urged the Court of Appeal to do more to ensure that an accused’s right to a fair trial is fully respected. In a bulletin released on Monday, the CCHR said it had monitored 273 cases at the

  • Fish, frogs to boost local food supply

    The government has disbursed more than $4.5 million to boost aquaculture production and domestic market supply amid the Covid-19 pandemic. Minister of Agriculture, Forestry and Fisheries Veng Sakhon told The Post on Monday that in boosting agricultural production, the ministry has received financing from development partners

  • Planning ministry hands out cash to 420,000 poor families in Kingdom

    The Ministry of Planning has identified 20,000 more poor families in the country, bringing the total to over 580,000, while over 420,000 of them have received the government’s cash assistance. In the meantime, many social security cards from families not deemed to be poor have been revoked.

  • Nature in focus at inaugural film and photo festival

    The first Cambodian Wildlife Photo and Film Festival – an event celebrating the conservation of nature through the eyes of wildlife photographers, nature enthusiasts and conservation experts – is scheduled for July 18-26 at Fauna in Focus’ Nature Discovery Centre in Siem Reap. The festival will be

  • Investors’ $14.4M projects approved

    New investments from local and foreign sources continue to pour into Cambodia despite the Covid-19 pandemic remaining a lingering threat to regional and global economies. This comes as the Kingdom’s gross domestic product (GDP) is expected to contract between one and 2.9 per cent this