The crude oil prices went down during the last days of the week, although the commodity remains close to its peak reached in the previous session, after the likelihood of US sanctions against one of the major OPEC producers Iran may further tighten the market. The US plans to reintroduce sanctions against Iran, which produces about 4% of world oil supplies after abandoning the agreement reached in 2015. The deal limits Tehran’s nuclear ambitions in exchange for the lifting of sanctions by the US and Europe.
The case around Iran comes amid the already tightening market due to strong demand, especially in Asia, given that Saudi Arabia’s largest exporter and Russia’s largest producer since early 2017 have restricted supply to support prices.
The futures on US WTI crude oil with delivery in June fell by 0.11% to 71.28 USD per barrel. The Brent variety declined by 0.22% to 77.30 USD per barrel. However, the prices of the two most traded oil varieties remain at their peak in November 2014.
Many analysts expect oil prices to rise to 80-100 USD per barrel by the end of the year when US sanctions will apply and Iranian exports will begin to shrink.
There are, however, signals that other OPEC suppliers will increase production to offset supply cuts from Iran. The market is now focused on OPEC and other oil suppliers’ ability to cope with potential supply disruptions. According to the analysts, the investors are increasingly looking at Kuwait and Iraq as producers with the greatest capacity to raise their production in response to a possible contraction in Iranian exports.
Crude oil production in the United States can also offset a possible market hole from Iran. Meanwhile, the US production reached a new record last week, rising to 10.7 million barrels per day. This is 27% over mid-2016 and means that US production is getting closer to that of Russia, which is largest oil producer with about 11 million barrels per day.
On commodity markets, the gold went down by 0.18% to 1,319.90 USD per ounce. Silver, copper and platinum also reported a decrease in their price by about 0.20%.
The dollar index, which measures the strength of US dollars against a basket of six major currencies, rose by 0.06% to 92.78 points.