Oil Surges Toward $100 on Iran Factor
NEW YORK (Dispatches) -- Crude oil prices shot to a fresh four-year high on Tuesday, rallying as U.S. President Donald Trump spoke heatedly about Iran ahead of U.S. sanctions on the country’s crude exports and bolstered by the apparent reluctance of OPEC and Russia to raise output to offset the potential hit to global supply.
Trump said in a speech before the United Nations that the United States will put more sanctions on Iran following oil sanctions that go into effect in Nov. 4.
"Iran will lose sizeable export volumes, and given OPEC+ reluctance to raise output, the market is ill-equipped to fill the supply gap,” Harry Tchilinguirian, global head of commodity markets strategy at French bank BNP Paribas, told the Reuters Global Oil Forum.
Brent crude futures were up $1.00 a barrel at $82.20, having touched a session peak of $82.55, the highest price since Nov. 10, 2014.
The global benchmark is on course for its fifth consecutive quarterly increase, the longest stretch of gains since early 2007, when a six-quarter run led to a record high of $147.50 a barrel.
U.S. crude futures were up 25 cents at $72.33 a barrel, close to their highest since mid-July.
The grade turned negative briefly during Trump’s UN speech, where he accused OPEC nations of "ripping off the world” and said he wants the group to stop raising prices.
The so-called "OPEC+” group, which includes the likes of Russia, Oman and Kazakhstan, met at the weekend to discuss a possible increase in crude output, but the upshot of the gathering was that the group was in no rush to do so.
The International Energy Agency forecast strong oil demand growth of 1.4 million barrels per day (bpd) this year and 1.5 million bpd in 2019, and said in its most recent report that the market was tightening.
"After the weekend’s meeting, the voices of those who foresee $100 a barrel and compare the current backdrop to the 2007/2008 bull run are getting louder,” said PVM Oil Associates strategist Tamas Varga.
"Undoubtedly the oil market is expected to be tight in coming months and, if OPEC’s own numbers are to be believed, global oil inventories are to fall during the remainder of the year.”
Trump had been counting on the Saudis to pump enough oil to keep prices in check ahead of midterm elections in November.
The economic fallout from Trump’s trade disputes with China, Canada, Mexico and the European Union is already making consumers increasingly worried about higher prices.
Fresh U.S. tariffs on $200 billion in Chinese imports which took effect Monday are expected to translate into higher prices for consumers and special pain for low- to middle-income voters who make up much of Trump’s base.
The uptick in crude prices began after Trump decided to leave the nuclear deal with Iran in May and reimpose sanctions on the country which is OPEC’s third largest producer.
President Hassan Rouhani said Iran can withstand US economic sanctions and called Washington's threats to choke off Iranian oil exports an "empty promise".
"The United States is not capable of bringing our oil exports to zero," he told NBC News in New York Monday.
"It's a threat that is empty of credibility. Perhaps on this path, we will sustain certain pressures but certainly the United States will not reach its objective," he added.
***
EU, Russia, China Agree Payment System for Iran
NEW YORK (Dispatches) -- The UK, Germany, France, Russia and China have agreed to establish a special payments system to circumvent U.S. sanctions on Iran stemming from President Trump's unilateral withdrawal from the 2015 nuclear deal.
The payments channel would be an alternative to SWIFT, the backbone of the global financial system that allows Iran to get paid for oil, pay for its imports and finance its activities abroad.
The five countries involved in the agreement remain committed to doing business with Iran, which the International Atomic Energy Agency says is still complying with the terms of the nuclear deal. President Trump, meanwhile, has threatened that anyone doing business with Iran will not be able to do business with the U.S.
The EU, along with Russia and China, said Monday they were determined to "protect the freedom of their economic operators to pursue legitimate business with Iran" in a statement issued after high-level talks at the United Nations.
"Mindful of the urgency and the need for tangible results, the participants welcomed practical proposals to maintain and develop payment channels, notably the initiative to establish a special purpose vehicle to facilitate payments related to Iran's exports, including oil," European Union foreign policy chief Federica Mogherini told reporters after a meeting of senior officials from Britain, China, France, Germany, Russia and Iran.
"In practical terms this will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran and this will allow European companies to continue to trade with Iran in accordance with European Union law and could be open to other partners in the world," she said.
"The key is to keep all possibilities open so that we can signal to the Iranians that the door isn't closing," said a senior French diplomat.
The European Union has so far failed to devise a workable legal framework to shield its companies from U.S. sanctions that go into effect in November and that, among other things, seek to choke off Iran's oil sales, diplomats said.
On Monday, French state-owned bank Bpifrance abandoned a plan to set up a financial mechanism to aid French firms trading with Iran.
Bpifrance’s Chief Executive Nicolas Dufourcq said the lender had put on hold a project to finance French companies that wished to export goods to Iran despite U.S. sanctions.
The plan was to establish euro-denominated export guarantees to Iranian buyers of French goods and services and avoid the extraterritorial reach of U.S. legislation by structuring the financing through vehicles without any U.S. link.
Swiss oil trader Vitol also said Tuesday it will stop doing business with Iran after the United States reimposes sanctions on Tehran’s oil trade from Nov. 4.
Senior executive Mike Muller, however, said the commodity merchant looked forward to returning to Iran when problems are sorted out.
"We have a longstanding relationship with Iran and clearly I look forward to when trade can be resumed, but for now, one needs explicit waivers from the US, and not just the U.S. but the global banking community and everything else,” he was quoted as saying in Singapore.
A spokesman for AB Volvo said the Swedish truckmaker had stopped assembling trucks in Iran because U.S. sanctions are preventing it from being paid.
"With all these sanctions and everything that the United States put in place, the bank system doesn’t work in Iran. We can’t get paid. So for now we don’t have any business in Iran,” Reuters quoted Volvo spokesman Fredrik Ivarsson as saying.
Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei said last month that Iranian officials should stop pinning their hopes on Europe to save the international nuclear deal.
"There is no problem with continuing relations and negotiations with Europe, but hope should be abandoned regarding matters such as the nuclear deal,” he said in a meeting with President Rouhani and members of his cabinet.
Ayatollah Khamenei is the champion of a resistive economy which seeks to counter sanctions through increasing the country’s resilience to outside pressures by boosting domestic production.
***
Trump said in a speech before the United Nations that the United States will put more sanctions on Iran following oil sanctions that go into effect in Nov. 4.
"Iran will lose sizeable export volumes, and given OPEC+ reluctance to raise output, the market is ill-equipped to fill the supply gap,” Harry Tchilinguirian, global head of commodity markets strategy at French bank BNP Paribas, told the Reuters Global Oil Forum.
Brent crude futures were up $1.00 a barrel at $82.20, having touched a session peak of $82.55, the highest price since Nov. 10, 2014.
The global benchmark is on course for its fifth consecutive quarterly increase, the longest stretch of gains since early 2007, when a six-quarter run led to a record high of $147.50 a barrel.
U.S. crude futures were up 25 cents at $72.33 a barrel, close to their highest since mid-July.
The grade turned negative briefly during Trump’s UN speech, where he accused OPEC nations of "ripping off the world” and said he wants the group to stop raising prices.
The so-called "OPEC+” group, which includes the likes of Russia, Oman and Kazakhstan, met at the weekend to discuss a possible increase in crude output, but the upshot of the gathering was that the group was in no rush to do so.
The International Energy Agency forecast strong oil demand growth of 1.4 million barrels per day (bpd) this year and 1.5 million bpd in 2019, and said in its most recent report that the market was tightening.
"After the weekend’s meeting, the voices of those who foresee $100 a barrel and compare the current backdrop to the 2007/2008 bull run are getting louder,” said PVM Oil Associates strategist Tamas Varga.
"Undoubtedly the oil market is expected to be tight in coming months and, if OPEC’s own numbers are to be believed, global oil inventories are to fall during the remainder of the year.”
Trump had been counting on the Saudis to pump enough oil to keep prices in check ahead of midterm elections in November.
The economic fallout from Trump’s trade disputes with China, Canada, Mexico and the European Union is already making consumers increasingly worried about higher prices.
Fresh U.S. tariffs on $200 billion in Chinese imports which took effect Monday are expected to translate into higher prices for consumers and special pain for low- to middle-income voters who make up much of Trump’s base.
The uptick in crude prices began after Trump decided to leave the nuclear deal with Iran in May and reimpose sanctions on the country which is OPEC’s third largest producer.
President Hassan Rouhani said Iran can withstand US economic sanctions and called Washington's threats to choke off Iranian oil exports an "empty promise".
"The United States is not capable of bringing our oil exports to zero," he told NBC News in New York Monday.
"It's a threat that is empty of credibility. Perhaps on this path, we will sustain certain pressures but certainly the United States will not reach its objective," he added.
***
EU, Russia, China Agree Payment System for Iran
NEW YORK (Dispatches) -- The UK, Germany, France, Russia and China have agreed to establish a special payments system to circumvent U.S. sanctions on Iran stemming from President Trump's unilateral withdrawal from the 2015 nuclear deal.
The payments channel would be an alternative to SWIFT, the backbone of the global financial system that allows Iran to get paid for oil, pay for its imports and finance its activities abroad.
The five countries involved in the agreement remain committed to doing business with Iran, which the International Atomic Energy Agency says is still complying with the terms of the nuclear deal. President Trump, meanwhile, has threatened that anyone doing business with Iran will not be able to do business with the U.S.
The EU, along with Russia and China, said Monday they were determined to "protect the freedom of their economic operators to pursue legitimate business with Iran" in a statement issued after high-level talks at the United Nations.
"Mindful of the urgency and the need for tangible results, the participants welcomed practical proposals to maintain and develop payment channels, notably the initiative to establish a special purpose vehicle to facilitate payments related to Iran's exports, including oil," European Union foreign policy chief Federica Mogherini told reporters after a meeting of senior officials from Britain, China, France, Germany, Russia and Iran.
"In practical terms this will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran and this will allow European companies to continue to trade with Iran in accordance with European Union law and could be open to other partners in the world," she said.
"The key is to keep all possibilities open so that we can signal to the Iranians that the door isn't closing," said a senior French diplomat.
The European Union has so far failed to devise a workable legal framework to shield its companies from U.S. sanctions that go into effect in November and that, among other things, seek to choke off Iran's oil sales, diplomats said.
On Monday, French state-owned bank Bpifrance abandoned a plan to set up a financial mechanism to aid French firms trading with Iran.
Bpifrance’s Chief Executive Nicolas Dufourcq said the lender had put on hold a project to finance French companies that wished to export goods to Iran despite U.S. sanctions.
The plan was to establish euro-denominated export guarantees to Iranian buyers of French goods and services and avoid the extraterritorial reach of U.S. legislation by structuring the financing through vehicles without any U.S. link.
Swiss oil trader Vitol also said Tuesday it will stop doing business with Iran after the United States reimposes sanctions on Tehran’s oil trade from Nov. 4.
Senior executive Mike Muller, however, said the commodity merchant looked forward to returning to Iran when problems are sorted out.
"We have a longstanding relationship with Iran and clearly I look forward to when trade can be resumed, but for now, one needs explicit waivers from the US, and not just the U.S. but the global banking community and everything else,” he was quoted as saying in Singapore.
A spokesman for AB Volvo said the Swedish truckmaker had stopped assembling trucks in Iran because U.S. sanctions are preventing it from being paid.
"With all these sanctions and everything that the United States put in place, the bank system doesn’t work in Iran. We can’t get paid. So for now we don’t have any business in Iran,” Reuters quoted Volvo spokesman Fredrik Ivarsson as saying.
Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei said last month that Iranian officials should stop pinning their hopes on Europe to save the international nuclear deal.
"There is no problem with continuing relations and negotiations with Europe, but hope should be abandoned regarding matters such as the nuclear deal,” he said in a meeting with President Rouhani and members of his cabinet.
Ayatollah Khamenei is the champion of a resistive economy which seeks to counter sanctions through increasing the country’s resilience to outside pressures by boosting domestic production.
***