It is difficult to assess exactly how renewed US sanctions towards Iran will play out given many moving parts. But it goes without saying that this is bullish for the oil market. Oil flows from Iran will be restricted and the market will be tighter with less spare capacity as a safety cushion. As such the path to the $80ies/bl now seems more or less given. The US want’s to tighten the economic screws on Iran as quickly as possible. The US State Department has stated that anyone who is looking to apply for significant reduction exemptions under the NDAA sanctions in early November (180 days from now) should start to reduce their purchases already in coming 180 days wind-down phase. All nuclear related sanctions will snap back at the end of the coming six-month wine-down period. It will prohibit Iran from accessing the USD system and restrict Iranian oil from flowing in the international market.
Iran has stated that it considers the Nuclear deal to be intact with the remaining counterparts of the agreement. It will thus hold back from resuming uranium enrichment but is ready to give the order for unrestricted enrichment to its Atomic Energy Organisation. The reinstatement of the US NDAA sanctions will however move forward irrespectively of this.
This evening at 16.30 CET we have the US weekly oil inventory data. The API last night indicated a strong draw in crude and products. This will likely be a catalyst for yet higher oil prices later today.
Price action – Confusing yesterday but making more sense today as prices reach new high since 2014
Price action yesterday was quite confusing as Brent crude settled down 1.7% at $74.85/bl despite the fact that Donald ditched the Iran nuclear deal. This morning however it all makes more sense as Brent jumps 3% to $77/bl and a new high since 2014. This evening at 16.30 CET we’ll have US oil inventory data. The US API on Tuesday evening released partial data showing Crude stocks down 1.9 m bl, Distillate stocks down 6.7 m bl and gasoline stocks down 2.1 m bl. After a longer period of mixed US inventory data this is straight out bullish data if the materialize this evening as the US API indicated last night. Together with the nixing of the Iran nuclear deal and the reinstatement of the US NDAA sanctions this is likely going to drive prices higher later today on top 3% already this morning.