Sanctions on Iran and Global Oil Prices

October 4, 2018 6:34 am Published by Leave your thoughts

Iranian Sanctions

There is a lot of shifting happening right now in global oil productions. Under President Trump’s foreign policy, sanctions on Iranian oil are returning in November. Iran produces a little over 2 million barrels per day. Although the US now produces oil at a record 11.1 million barrels per day, transportation bottlenecks are preventing the crude from getting to market quickly enough. It’s ending up in storage, swelling inventory to 8 million barrels. Russia and Saudi Arabia jointly agreed to increase their output. The Organization of the Petroleum Exporting Countries (OPEC) decreased oil production to cause prices to rise to a more favorable level. Saudia Arabia, also an OPEC member and arch-rival of Iran, is giddy to take a chunk out of the Iranian oil market for itself. Reuters

$100 Oil

No one knows precisely how much oil Iran will be able to bring to market despite US sanctions. Large Asian economies such as India and China cannot process the heavier US crude in their refineries, which means they rely entirely on middle-Eastern producers. So, what does all this say? Traders are buying options, and betting that oil will spike to $100 barrel after sanctions take place. They are betting oil could quickly climb from a range of $76-$86 to over $100 per barrel. How long they expect the price surge to last is an unknown, but they don’t need to hold contracts indefinitely to make their profits and move on. A bullish market for oil is on the horizon, as traders are betting that even with increased production globally, demand will outstrip supplies for growing economies that need millions of barrels of oil every day. Reuters

Tags: , , , , , ,

Categorised in:

This post was written by Daniel Jones

Leave a Reply

Your email address will not be published. Required fields are marked *