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

Just Posted

Lacombe Canadian Archery champion finishes 10th at worlds

Cameron Herbert has been a competitive archer for 10 years

Lacombe County: Do you have a gated property? Here’s what you need to know.

These gates are a deterrent for rural crime, they can also impede on emergency personnel

Lacombe Police Service joins North American rail-safety operation aimed at reducing preventable deaths and injuries on rail lines

Operation Clear Track aims to reduce the number of railway crossing and trespassing incident

WATCH: Enhanced Emergency Department opens at Lacombe Hospital

$3.1 million facility jointly funded by AHS, Lacombe Health Trust

Wetaskiwin RCMP investigate armed robbery

Wetaskiwin police seek identification of suspects

Blackfalds RCMP investigate fatal collision with cyclist on Highway 2

32-year-old male cyclist from Red Deer was pronounced dead at the scene

NDP, Liberals promise more spending, while Tories promise spending cuts

Making life more affordable for Canadians a focus in the 2019 election

Vaping-related illness confirmed in Ontario believed to be first in Canada

Middlesex-London Health Unit had no further details about the case — believed to be the first confirmed in Canada

Canadian stars Virtue, Moir say in video they’re ‘stepping away’ from ice dancing

The pair thank fans for their support in an emotional message

Outspoken Imperial Oil CEO Rich Kruger stepping down later this year

Imperial Oil is about 70 per cent owned by Texas-based Exxon Mobil Corp., since 2013

‘Time to take action:’ Children advocates call for national youth suicide strategy

Council wants Ottawa to make reporting of suicides and attempted suicides mandatory for data collection

Canadian inflation decelerates to 1.9% as gas prices weaken

August was the sixth straight month that price growth was 1.9 per cent or higher

Most Read