Brent crude oil on Friday topped US$80 a barrel for the first time since November 2014, as the market grew concerned that the Trump administration’s effort to sanction Iran’s crude exports could be more successful than originally thought.
Brent, the international benchmark for oil prices, hit a session high of US$80.50 a barrel, its strongest level since November 24, 2018. The contract was up 66 cents at US$79.94 by 11:17 a.m. ET (1317 GMT).
U.S. West Texas Intermediate crude rose 16 cents to US$71.65 a barrel. WTI earlier hit a high going back to November 28, 2014 at US$72.30 a barrel.
President Donald Trump announced last week he would withdraw the United States from the Iran nuclear deal and restore wide-ranging sanctions on Iran. His administration is gave companies 90 to 180 days to wind down current business with Iran subject to sanctions.
The market is becoming convinced that Trump will be able to disrupt crude exports after his administration slapped sanctions on the head of Iran’s central bank earlier this week, said John Kilduff, founding partner at energy hedge fund Again Capital.
“That showed that he’s not kidding around. It’s very much a forward-leaning, aggressive strategy against Iran,” he said.
A debate had raged in the market over the effectiveness of the sanctions, largely because China and key U.S. allies in Europe still support the nuclear deal. While some analysts said sanctions could wipe 1 million barrels per day of Iranian crude off the market, others said the impact would be limited to fewer than 500,000 barrels a day.
The Trump administration ultimately took a tougher stance than many expected, restoring all sanctions that were in place prior to their suspension in 2016.
The European Union is exploring ways to protect the continent’s companies, but the market is losing faith that Washington will issue sanctions waivers to the shippers, insurers and financial institutions necessary to bring Iranian oil to buyers, according to Kilduff.