Brent gains as Trump vows stricter sanctions against Iran

The front-month ICE Brent contract has gained $0.76/bbl on the day, to trade at $75.70/bbl at 09.00 GMT.

PHOTO: Flags of the US and Iran. Getty Images

Upward pressure:

Crude oil prices moved higher after US President Donald Trump signed a directive to increase pressure on Iranian crude flows, by enforcing stricter sanctions with an aim to drive Tehran’s oil exports to zero.

“As pledged during his campaign, Trump has issued a directive that aims to ramp up economic pressure on Iran,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

This development is hardly unexpected, considering that during Trump’s previous term he had adopted a hardline stance on Iran and reinstated oil sanctions at the time, according to market analysts.

The stricter enforcement of sanctions “could see as much as 1m b/d [ 1 million b/d] of supply at risk,” two analysts from ING Bank said.

Downward pressure:

Brent’s price felt some downward pressure from rising US crude inventories and a freshly brewing Sino-US tariff war.

The White House confirmed yesterday that a 10% tariff would be applied to all imports from China. This news was immediately followed by China imposing a retaliatory tariff of 10% on US oil imports.

“The trade dispute between the US and China has raised demand concerns—not least in China, an economy that has grown increasingly dependent on exports at a time of weak consumer confidence at home,” Saxo Bank’s head of commodity strategy Ole Hansen remarked.

Oil demand growth concerns got another hit after the American Petroleum Institute (API) reported a big spike in US crude stocks. Crude oil inventories in the US increased by 5.02 million bbls in the week that ended 31 January, according to the API.

A surge in US crude stocks can indicate a drop in oil demand, which can cap Brent's price rise.

By Aparupa Mazumder

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