The attack by Iran on Israel last Saturday prompted the United States to tighten sanctions against the regime in Tehran. The new sanctions will also cover entities that facilitate the transportation and processing of Iranian crude. Despite existing sanctions, Iran’s oil export increased significantly last year, and in the first quarter of this year, it reached its highest level in over five years, averaging 1.56 million barrels per day. It is speculated that most of this crude was shipped to China, though there is no official data on this.
The new sanctions will also affect transactions between financial institutions and Iranian banks (which are already under sanctions), specifically those transactions related to the purchase of oil and petroleum products.
It is worth recalling that the previous U.S. president, Donald Trump, decided in 2018 to reimpose sanctions on Iran, leading to a marked decline in the country’s oil export and production.
This factor should fundamentally support higher oil prices but moderately so. Currently, the oil market is primarily focused on the prospects for global demand in the second half of the year and whether Saudi Arabia will decide to extend its production cuts into the third quarter.
Brent oil prices charted a double-top formation in the first half of April, effectively signaling potential declines. We are currently witnessing a technical correction. In the medium term, increases are predominant. The current declines are still smaller in magnitude compared to those observed at the end of January and the beginning of February this year. Key support appears to be at the level of 85 – 84.50 USD per barrel, around which the upward trend line also runs.
Łukasz Zembik, Oanda TMS Brokers.
