SINGAPORE: Oil prices on Friday dipped away from multi-year highs reached the previous session on hopes that alternative supplies could replace a looming drop in Iranian exports when U.S. sanctions against Tehran are re-imposed.
The United States plans to re-introduce sanctions against Iran, which produces around 4 percent of global oil supplies, after abandoning an agreement reached in late 2015 that limited Tehran’s nuclear ambitions in exchange for removing U.S.-Europe sanctions.
The sanctions come amid an oil market that has been tightening due to strong demand, especially in Asia, and as top exporter, Saudi Arabia and No.1 producer Russia have led efforts since 2017 to withhold oil supplies to prop up prices.
Brent crude futures, the international benchmark for oil prices, were at $77.329 per barrel at 0308 GMT, down 19 cents, or 0.2 percent, from their last close. Brent the previous day hit its highest since November 2014 at $78 a barrel.
U.S. West Texas Intermediate (WTI) crude futures were down 11 cents at $71.25 a barrel, but still not far off Thursday’s November 2014 high of $71.89 per barrel.
Many analysts expect oil prices to rise to $80-$100 per barrel later this year, once U.S. sanctions start to bite and Iran’s exports start sinking.
There are, however, signs that other suppliers from within the Organization of the Petroleum Exporting Countries (OPEC) will step up output to counter the Iran disruption.
Outside OPEC, soaring U.S. crude oil production may also help fill Iran’s supply gap, hitting another record last week by climbing to 10.7 million barrels per day (bpd).
That’s up 27 percent since mid-2016 and means U.S. output is creeping ever closer to that of top producer Russia, which pumps around 11 million bpd.