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Home / World / The oil price is likely to record the largest weekly increase in a month as Iran's sanctions threaten

The oil price is likely to record the largest weekly increase in a month as Iran's sanctions threaten



LONDON (Reuters) – Oil price rose Thursday and was set for its largest weekly increase in a month, as the market prepared for potential disruptions to crude oil flows from Iran's main exporter in the face of US sanctions.

FILE PHOTO: A worker inspects the valve of an oil pipeline at the Nahr Bin Umar oil field, north of Basra, Iraq December 21
, 2015. REUTERS / Essam Al-Sudani / archival photo

The United States plans to impose new sanctions against Iran, which produces about 4 percent of world oil supplies, after repealing an agreement in late 2015 that limited Tehran's nuclear activities in exchange for the lifting of US sanctions.

Brent crude futures rose 29 cents to $ 77.50 a barrel at 0933 GMT, after rising 3.5 percent this week, the largest weekly increase since mid-April.

U.S. West Texas Intermediate crude oil futures rose 42 cents to $ 71.56 a barrel.

The price of oil has been at its highest level since the end of 2014 and is on course for the fourth quarterly earnings in a row, the longest in over 10 years.

Analysts had little hope that opposition to US action would prevent sanctions.

"Europe and China will not fight US sanctions, they will grumble and accept it, and there is no one who is realistic about Iran," said energy adviser FGE.

"We believe that the previous 1 million bpd limit on exports (imposed during earlier sanctions) will be reintroduced, and it may still take several laps to reach the targets," wrote the founder and CEO Chairwoman of the FGE, Fereidun Fesharaki, in a note.

Even without any interruption in crude oil flows, the balance between supply and demand in the oil market has been steadily worsening, especially in Asia, and Saudi Arabia and Russia, the leading exporter, has been aiming to hold oil supplies to 2017 prices support.

Saudi Arabia is monitoring the impact of the US withdrawal from the Iran nuclear deal on oil supplies and is ready to make up for any shortcomings, but it will not act alone to close the gap, an OPEC source said Oil thinking of the Kingdom was familiar Wednesday.

"What will be the full impact on Iranian flows is still hard to gauge," said Petromatrix strategist Olivier Jakob.

"One thing that has changed and that I think is a new development is that the White House administration really got Saudi Arabia to do something about the price and offer again bringing prices to market … before (when the sanctions last came into force), Saudi Arabia drove its own oil policy. "

One factor that could partially mitigate a shortfall from Iran is the rising US oil production.

The Tuesday's EIA raised its forecast for US production in its monthly report at the end of next year to 12 million barrels a day. The agency has raised its forecasts since August every month. [EIA/M]

This would make the United States the world's largest producer before Russia and Saudi Arabia.

Additional coverage by Henning Gloystein in SINGAPORE; Arrangement by Jane Merriman


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