Iran sanctions send oil prices, supply concerns higher

Experts said the sanctions could potentially remove up to 1.2 million barrels of oil per day

Secretary of State Mike Pompeo speaks during a news conference on Monday, April 22, 2019, at the Department of State in Washington. (AP Photo/Sait Serkan Gurbuz)

The Trump administration’s decision to impose sanctions on countries that buy Iranian oil is raising concerns about global crude supply and sending oil prices to their highest levels since October.

Industry experts said Monday that the sanctions could potentially remove up to 1.2 million barrels of oil per day from international markets. But that number will likely be lower, depending on how countries respond and just how much oil Iran continues to export.

READ MORE: Oil and gas sector applauds new Alberta premier’s many pro-business pledges

President Donald Trump wants to eliminate all of Iran’s revenue from oil exports, money he says funds destabilizing activity in the Middle East and elsewhere.

The announcement primarily impacts Iranian oil importers including China, India, Japan, South Korea and Turkey.

“It’s difficult to imagine all exports being cut off, especially since China is still a major buyer of Iranian crude oil,” said Jim Burkhard, vice-president for oil markets at IHS Markit. “How China responds will go a long way to shape just how much Iranian exports are cut or not.”

To make up for the Iranian losses, Saudi Arabia may increase production that the country had recently trimmed, but it “is going to use up all the spare capacity that they have, or pretty darn close to it, and that is going to leave markets feeling tight,” said Shin Kim, head of supply and production analytics at S&P Global Platts.

Oil prices rose more than 2% Monday, helping to lift some energy stocks.

The price of gasoline in the U.S. was already rising and the development could raise prices further.

“We’ve seen that market tighten up considerably even before the Iranian news, and we’re also seeing a number of refining issues in the U.S.,” said Ryan Fitzmaurice, energy strategist at Rabobank.

Rising oil — and gasoline — prices can squeeze consumers, whose spending accounts for about 70% of U.S. economic output. “They can take a bite out of consumers’ purchasing power,” said Scott Hoyt, senior director at Moody’s Analytics, where he follows consumer economics.

But unless energy prices surge considerably higher, a lot faster, Hoyt said he doesn’t expect them to do much damage to the American economy. Employers are hiring, and the unemployment rate is near a five-decade low of 3.8%.

Rising prices are “coming at a time when consumers are relatively well positioned to handle it,” he said. “Job growth is strong. Wage growth is healthy.” And prices at the pump aren’t even up much over the past year: The AAA reports that U.S. gasoline prices average $2.84 a gallon, compared to $2.76 a gallon a year ago.

___

Paul Wiseman in Washington, D.C. contributed to this report.

Cathy Bussewitz, The Associated Press

Like us on Facebook and follow us on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Fireside Festival gears up for day three in Kelowna

Sunday’s lineup includes the Snotty Nose Rez Kids, Lazy Syrup Orchestra and Frig Off

Rockets grab overtime win over Giants, aim to make it 3 straight with Sunday night rematch

Kelowna’s won their last two games and conclude 3-game weekend against Vancouver

Big White celebrates Aussie Day with a series of fundraisers for wildfire relief

Big White Ski Resort’s restaurants Globe Tapas and Blarney Stone raised $6,000 for charity

Don’t look now: Warriors grab 6th win in 8 games after Morgan’s stellar outing

West Kelowna goalie Riley Morgan made 30 saves in a 4-1 win over Vernon Saturday

Officials reaching out to those in contact with Canada’s first coronavirus patient

The illness has sickened at least 1,975 people and killed 56 in China

North Okanagan youth ready to make some NOYSE

Showcase of excellence features talents of young local performance

Canada’s basketball community mourns Kobe Bryant after helicopter crash

Bryant was an 18-time NBA all-star who won five championships

Rockslide obstructing traffic on rural Shuswap road

Large boulders rolled onto Sunnybrae Canoe-Point Road in the South Shuswap.

‘Devastated’: Fans, celebrities remember Kobe Bryant after his death

Bryant played all of his 20-year career with the NBA with the Los Angeles Lakers

Investigation launched after six dead puppies dumped in Richmond hotel parking lot

RAPS reminds people they can always give up puppies they can’t take care of

Canadian Lunar New Year celebrations dampened by coronavirus worries

But Health Minister Patty Hajdu said today that the risk of infection is low

B.C. VIEWS: New coronavirus outbreak an important reminder

Walking the line between cautious and alarmist

Snow angels: B.C. volunteers shovel for those who can’t

‘They’ve helped me make it through the rest of the winter’

Most Read