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Excess capacity could blunt the impact of the Iranian oil supply dissipation, noted Katherine Judge and Avery Shenfeld, analysts at CIBC.  

Key Quotes:  

“Oil prices have gotten a lift from President Trump’s plan to thwart global Iranian oil purchases by expanding the breadth of sanctions to eliminate waivers. While that has sent crude benchmarks up to levels not seen since late 2018, the impact could be capped ahead given spare capacity available in other markets.”

” A higher price of oil, on top of pressure from Trump, could work to induce a climb in production in Saudi Arabia, where excess capacity is roughly three-quarters of Iranian production. Add to that a potential ramp up by Russia in addition to a possible acceleration in US drilling, and the dissipation of Iranian supply likely represents little further upside for oil prices.”