Oil prices hovered near 6-month highs on Tuesday after it was announced on Monday that U.S. President Donald Trump would not be renewing waivers on the Iranian sanctions that he had provided to some of the country’s biggest oil purchasers. “This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” said the White House in a statement after announcing its policy shift. The sanction waivers will end as of May 1, Washington announced. Before the recent imposition of sanctions against Iran, the country was the fourth-largest OPEC oil producer, producing nearly 3 million barrels per day. Recent supply to the countries receiving sanction waivers has cut Iran’s production to around 1 million barrels per day, and production is expected to decline to nothing when the waivers are ended.
After Trump unilaterally withdrew from the nuclear deal that the U.S. had made with Iran, he is now trying to force Iran to negotiate (or perhaps more appropriately, to accept) its terms. Specifically, the U.S. is demanding that Iran end ballistic missile tests, stop supporting U.S.-designated terror groups, limit its nuclear program, and release U.S. detainees that are being held in Iran.
According to analyst predictions, if Iran no longer provides oil to its eight primary customers, 1 million barrels per day will be removed from the market, tightening supply and likely sending prices even higher. With OPEC’s production cuts in place since January and no plans to halt the cuts before June, supply could be restricted to new levels. OPEC’s cuts have reduced global production by 1.2 million barrels per day. Nevertheless, the White House has said that it intends to work closely with Saudi Arabia and the United Arab Emirates to counterbalance the losses from Iranian production.
U.S. WTI futures were up 0.49 percent as of 2:03 p.m. HK/SIN, to $65.87 per barrel after hitting a 2019 high of $65.95 earlier in the session. Brent crude futures were up 0.34 percent to $74.29 per barrel.