Oil advances for third week as US imposes new Iran sanctions

epa04548401 (FILE) A file photo dated 22 November 1992 showing oil-pumping equipment standing abandoned at the oil well site near Surgut in Siberia, Russia. Global investors are worried by plummeting oil prices, which have fallen by about 50 per cent since the middle of the year as a result of a world-wide glut in oil and weak demand in the eurozone and China. The worries are reflected in rates of currencies and have also influenced global stock markets, with Japan's benchmark Nikkei 225 Stock Average plummeting three per cent and European shares posting further falls 06 January 2015 after US oil prices sank below the key 50-dollars-a-barrel mark. EPA/VADIM RUSAKOV

 

Bloomberg

Oil capped a third weekly gain as the US imposed fresh sanctions on Iran after a missile test and OPEC reached about 60 percent of its output-cut target. Futures climbed 0.5 percent in New York. The new restrictions were announced as President Donald Trump seeks to punish Tehran for its ballistic missile program
after warning the Islamic Republic that it’s “playing with fire.” The Organization of Petroleum Exporting Countries cut output by 840,000 barrels a day last month, according to a Bloomberg survey.
“This is a knee-jerk reaction,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “Whenever there are headlines that have something to do with the Persian Gulf you will see a response in the market.”
After posting the biggest annual gain in seven years in 2016, oil has fluctuated in the mid-$50s in a tug of war between OPEC cuts and signs of recovering US output. While producers from Saudi Arabia to Angola have implemented cuts and Russia says it’s ahead of schedule with its own reduction, wary investors are also considering that US shale drillers are boosting activity. West Texas Intermediate for March delivery increased 29 cents to $53.83 a barrel on the New York Mercantile Exchange. Total volume traded was about 27 percent below the 100-day average. Prices rose 1.2 percent this week.
Brent for April settlement advanced 25 cents, or 0.4 percent, to $56.81 a barrel on the London-based ICE Futures Europe exchange. It closed at a $2.34 premium to April WTI. The global benchmark rose 2.3 percent this week. The Trump administration has sought to take a harder line on Iran, banning its citizens from entering the US and accusing the nation of interfering in the affairs of US allies in the Middle East. But the sanctions announced Friday were limited in scope, serving mostly as a warning signal.
OPEC pumped 32.3 million barrels a day last month, according to the Bloomberg survey. The 10 members of the group that pledged to make cuts implemented 83 percent of those reductions on average, but their efforts were offset by gains from Iran, Nigeria and Libya.
Accounting for the members who raised output and the suspension of Indonesia, OPEC’s total production remains 550,000 barrels a day above the target set out in the Nov. 30 deal.

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