On Friday morning, oil prices stayed near multi-year highs in Asia as looming U.S. sanctions against major crude exporter Iran threatened to tip the oil market into undersupply.
For June delivery, Crude Oil WTI Futures were trading at $71.20 a barrel at 11:20PM ET (03:20 GMT), down 0.22%. Brent Oil Futures for July delivery, traded in London, were down 0.31% at $77.23 per barrel.
For September delivery, Shanghai Crude Oil Futures were up 0.30% at 472.00 yuan ($74.37) per barrel.
The U.S. plans to impose new sanctions against Iran, which produces around 4% of global oil supplies and is the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC).
A limit of 1 million barrels per day (bpd) for exports may be re-imposed on Iran, casting uncertainty over global oil supplies. In April, Iran’s oil exports hit 2.6 million bpd, with China and India buying more than half of Iran’s oil.
The sanctions come among an oil market that has already been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and top producer Russia have led efforts since 2017 to withhold oil supplies to prop up prices.
Oil prices are expected to spike, with the possibility of $90-100 per barrel prices later this year.
As planned sanctions are implemented, the near-term impact on the oil market would be limited due to a 180-day period but the impact will escalate by November.
Furthermore, U.S. President Donald Trump’s move to pull the U.S. out of the international nuclear deal raised the risk of conflict in the Middle East, triggering concerns of instability in the oil market.
The market is now focused on OPEC and other producers’ ability to react to this potential supply disruption.
Outside OPEC, soaring U.S. crude oil production may help fill Iran’s supply gap, hitting another record last week by climbing to 10.7 million bpd./investing.com