1 min read.Updated: 23 Apr 2019, 08:59 AM ISTBloomberg
Crude has rallied about 38% this year as OPEC and its partners embarked on their mission to cut output
Disruptions in Venezuela, Nigeria and Libya have helped further squeeze supplies
Oil extended gains after leaping to a six-month high Monday as the Trump administration said it will no longer give any country a pass on sanctions barring purchases of Iranian supply. Futures in London added as much as 0.5% today after US Secretary of State Mike Pompeo said any nation that continues to buy Iranian oil will face American sanctions. In response, Iran threatened to shut the Strait of Hormuz, a key maritime chokepoint for Persian Gulf producers, and said it’s engaged in “intensive" talks with partners to blunt the impact of Trump’s escalation.
Crude has rallied about 38% this year as OPEC and its partners embarked on their mission to cut output and curtail a global glut. Disruptions in Venezuela, Nigeria and Libya have helped further squeeze supplies. America’s decision to zero out exemptions for purchasing oil from the cartel’s fourth-largest producer adds to the bullish picture, with RBC Capital Markets forecasting a loss of 700,000 to 800,000 barrels a day in Iranian exports.
“Oil quickly repriced higher on panic fears that markets could face an immediate supply crunch, adding more pressure to the already tenuous global supply squeeze," said Stephen Innes, head of trading and market strategy at SPI Asset Management. “This suggests that $80 Brent under current market conditions - something we thought unlikely only days ago - should now be considered a possibility."
Brent for June settlement climbed as much as 39 cents to $74.43 a barrel on the London-based ICE Futures Europe exchange, and was at $74.27 a barrel in Singapore. Prices rose $2.07 on Monday to $74.04, the highest close since October 31. Brent was at a premium of $8.52 to WTI.
West Texas Intermediate for June delivery rose as much as 35 cents to $65.90 a barrel on the New York Mercantile Exchange before trading at $65.76 a barrel. The May contract expired on Monday at a six-month high of $65.70.