Iran sanctions send oil prices, supply concerns higher

Experts said the sanctions could potentially remove up to 1.2 million barrels of oil per day

Secretary of State Mike Pompeo speaks during a news conference on Monday, April 22, 2019, at the Department of State in Washington. (AP Photo/Sait Serkan Gurbuz)

The Trump administration’s decision to impose sanctions on countries that buy Iranian oil is raising concerns about global crude supply and sending oil prices to their highest levels since October.

Industry experts said Monday that the sanctions could potentially remove up to 1.2 million barrels of oil per day from international markets. But that number will likely be lower, depending on how countries respond and just how much oil Iran continues to export.

READ MORE: Oil and gas sector applauds new Alberta premier’s many pro-business pledges

President Donald Trump wants to eliminate all of Iran’s revenue from oil exports, money he says funds destabilizing activity in the Middle East and elsewhere.

The announcement primarily impacts Iranian oil importers including China, India, Japan, South Korea and Turkey.

“It’s difficult to imagine all exports being cut off, especially since China is still a major buyer of Iranian crude oil,” said Jim Burkhard, vice-president for oil markets at IHS Markit. “How China responds will go a long way to shape just how much Iranian exports are cut or not.”

To make up for the Iranian losses, Saudi Arabia may increase production that the country had recently trimmed, but it “is going to use up all the spare capacity that they have, or pretty darn close to it, and that is going to leave markets feeling tight,” said Shin Kim, head of supply and production analytics at S&P Global Platts.

Oil prices rose more than 2% Monday, helping to lift some energy stocks.

The price of gasoline in the U.S. was already rising and the development could raise prices further.

“We’ve seen that market tighten up considerably even before the Iranian news, and we’re also seeing a number of refining issues in the U.S.,” said Ryan Fitzmaurice, energy strategist at Rabobank.

Rising oil — and gasoline — prices can squeeze consumers, whose spending accounts for about 70% of U.S. economic output. “They can take a bite out of consumers’ purchasing power,” said Scott Hoyt, senior director at Moody’s Analytics, where he follows consumer economics.

But unless energy prices surge considerably higher, a lot faster, Hoyt said he doesn’t expect them to do much damage to the American economy. Employers are hiring, and the unemployment rate is near a five-decade low of 3.8%.

Rising prices are “coming at a time when consumers are relatively well positioned to handle it,” he said. “Job growth is strong. Wage growth is healthy.” And prices at the pump aren’t even up much over the past year: The AAA reports that U.S. gasoline prices average $2.84 a gallon, compared to $2.76 a gallon a year ago.

___

Paul Wiseman in Washington, D.C. contributed to this report.

Cathy Bussewitz, The Associated Press

Like us on Facebook and follow us on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Search and Rescue and RCMP investigate after abandoned kayak found on Kitimat River

KSAR and Kitimat RCMP confirmed the owner lost the recently-discovered kayak a couple of weeks ago.

Provincial COVID-19 data can now be used for B.C. to prepare for a second wave

In the past week, B.C. has seen a slight spike in daily test-positive case counts

Four air ambulance flights out of Terrace delayed or cancelled

Pandemic precautions caused nighttime closure of service station providing weather data to pilots

Skeena Resources, Tahltan prez excited by purchase of Eskay Creek

Skeena gets full control of mine, Barrick gets 12 per cent of Skeena and a one per cent royalty

Tamitik Status of Women granted $500,000 to support housing construction project

The funds will be used to support the construction of second stage and affordable rental housing.

B.C. records 62 new COVID-19 cases, two deaths since Friday

Province has just over 200 active cases

Hotel rooms for B.C. homeless too hasty, NDP government told

Businesses forced out, but crime goes down, minister says

Wage subsidy will be extended until December amid post-COVID reopening: Trudeau

Trudeau said the extension will ‘give greater certainty and support to businesses’

B.C. government prepares for COVID-19 economic recovery efforts

New measures after July consultation, Carole James says

Tree planters get help with COVID-19 protective measures

Ottawa funds extra transportation, sanitizing for crews

Trudeau apologizes for not recusing himself from WE decision

He says his and his family’s longtime involvement with the WE organization should have kept him out of the discussions

Beverly Hills 90210 star’s family selling Vancouver Island Beach Resort

You can own Jason Priestley’s Terrace Beach Resort in Ucluelet for less than $5 million

Islanders want BC Ferries to follow order that lets residents board before tourists

For ferry-dependent communities, ferries are often the sole practical lifeline to work, school or medical appointments.

Most Read