Published: Tue, October 02, 2018
Markets | By Otis Pena

Oil prices reach four-year high ahead of United States sanctions on Iran

Oil prices reach four-year high ahead of United States sanctions on Iran

The recent increase in oil prices has prompted talk that crude could reach $100 per barrel for the first time since prices slumped in mid-2014, when Brent peaked at $115 per barrel.

U.S. West Texas Intermediate (WTI) crude futures were up 24 cents, or 0.3 per cent, at $75.54 a barrel.

"U.S. (fiscal) tightening, higher oil prices and ongoing trade frictions are all taking their taking their toll on the growth outlook", HSBC said.

Oil extended gains near the highest level in nearly four years as investors grapple with doubts over OPEC's ability to replace falling exports from Iran. In Iran, crude exports declined to their lowest in 2 1/2 years before the impending return of US sanctions.

"Market sentiment was lifted by a last-gasp deal to salvage NAFTA as a trilateral pact between the United States, Mexico and Canada, rescuing a US$1.2 trillion a year open-trade zone that had been about to collapse", it said.

Given that OPEC and Non-OPEC rebuffed President Trump's demands to boost oil production in order to offset the loss of supply from Iran and Venezuela suggests that oil prices may continue to track higher. The contract climbed $1.13, or 1.6 percent, on Friday. Total volume traded was about 52% below the 100-day average. The contract rose $2.25 to $84.98 a barrel on Monday. China's Sinopec said it had halved loadings of Iranian oil in September. The global benchmark crude traded at a $9.68 premium to WTI for the same month.

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With just weeks left until the sanctions are imposed, oil buyers are looking for new suppliers to avoid breaching the USA sanctions, which take effect from November 4. While trade tensions still remain between the world's two biggest economies, the deal caps a turbulent period for relations between the US and Canada, traditionally close allies on national security and trade.

Phil Flynn, an analyst at Price Futures Group in Chicago, said the NAFTA deal would boost oil prices because it "increases the growth prospects not only for Canada and the US, but for North America as a whole".

India's MRPL is looking for up to four million barrels of crude, two million barrels for delivery from November 6-20 and another two million for delivery from December 6-20.

With assistance from Stephen Stapczynski.

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