- Brent oil is trading near 2019 highs in Asia, having rallied 3 percent yesterday on Trump administration’s decision to end Iran sanctions waivers.
- Oil rally may gather pace if Iran closes the Strait of Hormuz.
Brent oil is currently trading at $74.35 per barrel, having hit a 2019 high of $74.50 yesterday.
The oil benchmark surged more than 3 percent yesterday after Washington abruptly announced an end all Iran sanctions waivers by May, forcing importers like Japan and India to stop buying from Tehran.
The Trump administration reimposed sanctions on Iran in November last year after unilaterally pulling out of the nuclear accord. Back then, the US had granted waivers to a few select countries – Iran’s eight biggest buyers – to continue importing oil in limited volumes.
Washington, however, now wants to force Iranian oil exports to zero and so has called for a complete ban. It is worth noting that Iranian oil exports, which stood at almost 3 million barrels per day before November, have now dropped below 1 million barrels per day, according to ship-tracking and analyst data in Refinitiv.
With the complete ban on Iranian crude, the nation’s supplies could slide further in the near future, leading to a tighter market. Further, Iran has threatened to close the Strait of Hormuz – a key oil route – in response to the US decision to end sanctions waivers on Iranian oil imports.
As a result, oil prices could continue to rise, leading to risk aversion in the financial markets, particularly in emerging Asian economies.
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