(Bloomberg) — Oil advanced after the US ramped up measures to hobble Iran’s crude exports, increasing pressure on Tehran amid a push for a new nuclear accord.
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West Texas Intermediate rose as much as 2% to top $68 a barrel, while global benchmark Brent climbed to near $72. The US Treasury Department sanctioned a Chinese oil refinery and its chief executive officer for allegedly buying Iranian oil as well as multiple vessels allegedly linked to a “shadow fleet” of ships that carry the OPEC member’s crude.
The moves herald a return to the so-called maximum pressure campaign against Iran that squeezed the nation’s crude exports during US President Donald Trump’s first term. Trump told Iran’s Supreme Leader Ali Khamenei in a recently delivered letter that his country has a two-month deadline to reach a new nuclear deal.
“Trump is positioning to significantly impact Iranian exports if negotiations fail,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “A modest price move higher makes sense, but I’d be surprised if this drives more than a $1 to $2 increase,” given the two-month deadline, she said.
A maximum-pressure campaign could remove as much as 1.5 million barrels of daily Iranian exports from global markets, according to Jorge Leon, head of geopolitical analysis at Rystad Energy A/S.
The sanctions injected a jolt of bullishness into a session that had earlier seen crude drift between gains and losses as markets assessed the Federal Reserve’s US economic outlook. While Fed Chair Jerome Powell said on Wednesday that the central bank is in no hurry to cut rates, the Treasury market boosted its bets on lower rates because of the uncertainty that he highlighted.
Still, crude remains markedly below its mid-January peak, as bearish factors pressures prices. While the escalating trade war threatens to reduce energy demand, OPEC and its allies are set to raise output starting April, contributing to a potential global surplus.
Member nations that have persistently flouted production quotas, including Kazakhstan, Iraq and Russia, provided updated plans to make additional cutbacks on Thursday. The reductions should — in theory — offset the group’s plans to revive halted output through to the end of next year, in a support to prices.
