LONDON – Oil prices again headed toward the $80 a barrel threshold Tuesday morning after the United States threatened to tighten economic sanctions against Iran.
Brent crude – the global benchmark – was up 0.3 percent to $79.44 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.3 percent at $72.55 a barrel.
Secretary of State Mike Pompeo on Monday made sweeping demands that Iran must meet before the US enters a new nuclear pact with the country. Washington threatened “the strongest sanctions in history” if the Islamic Republic didn’t yield to the requirements.
Oil today is up “specifically because of Pompeo’s speech,” said Thomas Pugh, commodities economist at Capital Economics.
“It certainly looks like the US is going to go as hard as possible on sanctions and try their best to make it hurt,” Pugh said.
President Donald Trump earlier this month pulled the US out of a 2015 international agreement to curb Iran’s nuclear activities, sending the oil price higher amid a belief that any new US sanctions will hinder crude supply.
Last week Brent temporarily breached $80 a barrel for the first time in over three-and-a-half years.
Analysts have estimated that anywhere from 400,000 to 1 million barrels a day of Iran’s 2.4 million barrels a day of crude exports could be at risk.
The risk to supply comes during an already tightening global oil market, and as the Organization of the Petroleum Exporting Countries and its allies continue to cut crude production as part of a coordinated agreement to mop up a global supply glut that had weighed on prices since late 2014.
Commercial petroleum stockpiles have fallen to their lowest levels in over three years, according to the International Energy Agency, in one of the clearest signs to date that the market is back in balance, the Dow Jones report added.
Crude prices are also being bolstered by fears of escalating supply disruptions in Venezuela, another OPEC member. The re-election of Venezuela’s far-left president, Nicolas Maduro, on Sunday in a race called illegitimate by the opposition and many foreign governments, paves the way for the imposition of stricter international sanctions on the country.
The US is widely expected to target the country’s already-embattled oil industry, analysts say.
Venezuelan crude output fell by 50,000 barrels a day in April month-on-month, to stand at 1.42 million barrels a day, according to the IEA’s latest monthly oil market report.
Oil market observers are looking ahead Tuesday to weekly US inventory data from the American Petroleum Institute, an industry group.
“The market will be watching closely the US crude oil export number, and whether we see another week of strong exports,” according to analysts at ING Bank.
Among refined products Tuesday, Nymex reformulated gasoline blend stock – the benchmark gasoline contract – was up 1percent to $2.2 a gallon. ICE gas oil, a benchmark for diesel, fuel, changed hands at $697.50 a metric ton, up 0.7 percent from the previous settlement.