Despite concerns that US sanctions are likely to restrict crude exports from major oil producer Iran, oil prices fell on May 16 ahead of an expected rise in the US’ crude inventory that could provide more evidence that demand may be slowing.
According to Reuters, Brent crude futures were last down 65 cents at $77.78 a barrel by 11:47 GMT, while US crude futures fell 32 cents to $70.99 a barrel, leaving the spread between the two just shy of a 2015 high of $7 a barrel.
OPEC said on May 16 that the price of the OPEC basket of fourteen crudes stood at $75.47 a barrel on May 15, compared with $74.20 the previous day, according to OPEC Secretariat calculations. The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE), and Merey (Venezuela).
Concerns that US sanctions on Tehran are likely to restrict crude exports from major oil producer Iran have sustained high oil prices. US President Donald J. Trump announced that he will impose sanctions on Iran over its nuclear programme, raising fears that markets will face shortages later this year when trade restrictions take effect.
World oil prices have surged more than 70% over the last year as demand has risen sharply while production has been restricted by the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and other producers, including Russia.
The tightening market has reduced the supply glut that depressed crude prices between late 2014 and early 2017.
The International Energy Agency (IEA) noted on May 9 that, in recent months, oil market dynamics have been shaped by strong growth in demand, compliance by countries party to the Vienna agreement to cut output, as well as the political crisis in Venezuela, leading to tighter overall market conditions.
“The restoration of sanctions on Iran, which exports 2.5 million barrels of oil a day and is the world’s fifth-largest exporter, may have implications for the market balance,” the IEA said. “The International Energy Agency, whose mandate is to support and safeguard global energy security, is monitoring the situation very closely. As ever, the IEA stands ready to act if necessary to ensure markets remain well supplied.”