Oil hits $80 a barrel on concerns about Iran supply

The price of oil is set to skyrocket due to potential U.S. sanctions on Iran, the head of French energy giant Total has said.

"Therefore, world oil demand growth is expected to slow" in the second half of the year. Unprecedented recent purchases of oil contracts by non-commercial speculators in the NY and London futures markets suggest that sanctions may already be priced in, with Brent oil trading at $78 a barrel.

While all eyes are riveted on Iran and the Middle East, the pace of Chinese oil demand growth could be the most underappreciated story in oil markets right now, Bloomberg Opinion columnist David Fickling writes.

The International Energy Agency said that U.S. stocks of crude oil shrank 1.4 million barrels. India, the third-largest consumer of oil after the USA and China, would be especially hard-hit if prices keep rising.

So far this year, China has lived up to these expectations. The current growth in oil prices already exceeds earlier predictions amid OPEC supply cuts and United States sanctions against Iran.

London's Brent crude touched USD80 a barrel for the first time since 2014. Since March - when annual lows were recorded and rise began - price of diesel has risen by 7% and gasoline 6.7%.


Note that the continuous rise in global crude oil prices is beneficial to countries like Nigeria which are highly dependent on the commodity for foreign exchange.

The IEA estimates demand for OPEC's crude will average 32.25 million bpd for the rest of 2018, compared with output of 32.12 million bpd in April. Now, up to a third of its remaining one million barrels a day in exports are at risk because of the near-collapse of the state oil company, sanctions and the new confrontation with ConocoPhillips.

Domestic supplies of natural gas rose by 106 billion cubic feet for the week ended May 11, the EIA said. This cycle is different, Goldman argues, because the upswing is being driven by strong demand rather than an unexpected supply outage.

Opec, which is a consortium of oil exporting nations, has this far not filled the supply hole in the market as it believes that the issue is not a lack of supply, but rather a a short-term spike in the market that will eventually blow over.

He said Iranian oil sales could plunge by 300,000 to 500,000 bpd in the next six weeks as well, after US President Donald Trump's decision this month to withdraw from an global nuclear deal with Iran and revive sanctions that could limit crude exports from Opec's third-largest producer.

Iran's oil buyers continue to buy its crude, assessing the implications of the sanctions during the 180-day wind-down period.


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