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

Police investigating man’s death in Winlaw

Foul play not established, but major crimes unit is investigating

Woman raising funds to save historic Rossland piano

Rare Steinway piano was in Miners Hall for a century, but was headed to the dump

West Kootenay opinion sought on health care issues

Rural Evidence Review getting strong response to survey call-out

By-election date set for Nakusp village council

Voters will be turning out to choose a replacement for Janis Neufeld

NSS Track team members headed to provincials

Nakusp Secondary School students do well at track meet

600 new campsites coming to provincial parks and recreation sites across B.C.

Tourism Minister announced half of the new spots to 13 most popular provincial parks

Court to rule on B.C.’s pipeline permit law in crucial case for Trans Mountain

A panel of B.C. Court of Appeal judges has been mulling B.C.’s constitutional reference cas

Theresa May to quit as party leader June 7, sparking race for new PM

The new Conservative leader will become prime minister without the need for a general election

B.C. man who fell off cliff returns there to rescue eagle from vulture attack

Nanaimo’s James Farkas, who broke his hip in a fall, saves eagle on same beach months later

Raptors beat Bucks 105-99 to move within 1 game of NBA Finals

Leonard scores 35 as Toronto takes 3-2 series lead over Milwaukee

Municipalities protest after B.C. declares marijuana crops ‘farm use’

UBCM president seeks answers in letter to John Horgan government

CMHC defends mortgage stress test changes amid calls for loosening rules

Uninsured borrowers must now show they could service their mortgage if rates rose two per cent

B.C. woman left ‘black and blue’ after being pushed off 40-foot cliff at lake

West Shore RCMP looking for witnesses as investigation continues

Kootenay youth substance use trending downward: survey

A bi-annual survey distributed to regional schools shows that youth substance use is decreasing

Most Read