WTI futures in New York traded at a three-year high of $71/barrel
Oil to continue rally as US exit of Iran deal stokes concern
Oil was poised for a second weekly gain as traders anticipated the supply impact of renewed US sanctions on Iran and continuing tensions in the Middle East.
Futures in New York traded above $71 a barrel, near the highest level since November 2014, and are up 2.3 per cent this week. Israel said it conducted the biggest raid in at least three decades at Iran’s military facilities inside Syria. Concerns about the stability of the region were already heightened after US President Donald Trump decided to exit a 2015 nuclear accord and hit OPEC’s third-largest producer with sanctions intended to curb its exports.
Crude’s recent rally has been driven by a deepening regional conflict in the energy-rich Middle East and Trump’s hawkish stance on Iran. While Saudi Arabia is ready to work with other producers to mitigate any impact of a shortage following the US move, Goldman Sachs Group said the sanctions could push prices above its forecasts and Bank of America Corp. sees a possibility oil could rise to $100 a barrel next year.
“Supply concerns have lifted oil prices,” said Norbert Ruecker, head of market and commodity research at Julius Baer Ltd. in Zurich. “We see the main impact on the oil price through the market mood -- geopolitical noise and escalation fears.”
West Texas Intermediate crude for June delivery was down 8 cents at $71.28 a barrel on the New York Mercantile Exchange at 1:07 p.m. in London. Total volume traded was about 8 percent below the 100-day average.
Brent for July settlement slipped 29 cents to $77.18 a barrel on the London-based ICE Futures Europe exchange. Prices are up 3.5 percent this week. The global benchmark crude traded at a $5.96 premium to July WTI.
Futures for September delivery on the Shanghai International Energy Exchange dropped 1.1 percent to 471.2 yuan a barrel. The contract is up 5.4 percent this week, heading for a fifth straight weekly advance.
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Some refiners and oil traders are already starting to look for alternatives to Iranian barrels. China’s Ministry of Commerce said Friday it’s engaged in mutually beneficial oil trading with Iran based on commercial factors, without elaborating whether it was going to persist with or curb imports. The U.S. has given buyers 180 days to wind down shipments from the Middle East producer to avoid penalties.