Oil prices hit their highest since November on Tuesday after Washington announced all waivers on imports of sanctions-hit Iranian oil would end next week, pressuring importers to stop buying from Tehran and further tightening global supply.
Brent crude futures were at US$74.25 per barrel, up 21 cents or 0.28 percent from their last close, after reaching their loftiest level since November at US$74.70.
U.S. West Texas Intermediate crude futures were at US$65.94 per barrel, up 39 cents or 0.59 percent, having marked their strongest since October at US$66.19 in earlier trading.
Despite the move by Washington, spare capacity from other suppliers such as Saudi Arabia might be able to ensure oil markets cope with a cut in Iranian exports.
“The oil price is likely going to continue on its current bull-ride for a while before Saudi Arabia decides to pitch in with substantially more production,” SEB commodities strategist Bjarne Schieldrop said.
The United States on Monday demanded that buyers of Iranian oil stop purchase by May 1 or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.
Before the reimposition of sanctions last year, Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries at around 3 million barrels per day (bpd), but April exports have shrunk to below 1 million bpd, according to tanker data and industry sources.
China, Iran’s largest customer with imports of about 585,400 bpd of crude oil last year, formally complained to Washington over the move, which a Chinese foreign ministry spokesman said “will contribute to volatility in the Middle East and in the international energy market”.
U.S. President Donald Trump is confident that Saudi Arabia and the United Arab Emirates will fulfill their pledges to make up the difference in oil markets, a U.S. official told reporters.
Saudi Energy Minister Khalid al-Falih said on Monday that his country would “coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance”.
Saudi Arabia is the world’s top oil exporter and de facto leader of OPEC, which has led global supply cuts since the start of the year aimed at propping up crude prices.
The group is set to meet in June to discuss output policy.