To say that the news about the fact that Washington completed the grace period for buyers of Iranian oil has disturbed the financial markets - not to say anything. The counterparties of Tehran seriously counted on its prolongation, perhaps with some reduction in quotas but a total ban drove the "bears" on Brent and WTI into a stupor. Black gold jumped almost to the semi-annual maxim amid fears of supply disruptions and growing global demand. Confidence of Donald Trump that the United States, Saudi Arabia, and the United Arab Emirates will be able to close the gap will keep the steadily upward movement of oil.
Before the imposition of sanctions last year, Iran was the fourth OPEC producer with a production volume of 4 million b/d. According to estimates by consulting company FGE Energy, the figure fell to 2.5 million b/s and exports to 1-1.3 million b/d to date. However, there is an opinion on the market taking into account illegal shipments, their total volume abroad is about 1.9 million b/s. The lion's part falls on China, Turkey, India, Japan, and South Korea. The first two states have already expressed dissatisfaction with the abolition of the grace period. Washington warned buyers about sanctions against them in case of refusal to reduce the export of Iranian oil to zero. In this situation, everything depends on Tehran, which must abandon its nuclear program.
Iranian oil exports
According to Goldman Sachs, the take-off of Brent and WTI quotes is associated with a surprise effect, while the emergency reserve capacity of Saudi Arabia, OEA and Russia is estimated to be at 2 million b/s and can increase to 2.5 million b/ s in 2020. This is more than required to close the gap, which will arise as a result of the reduction of Iranian exports around 1 million b/s. The bank predicts that the North Sea variety will stabilize in the range of $70-75 per barrel in the near future.
The decision of Donald Trump really looks like a surprise because he was already taking a tough stance on Iran in 2018. However, it softened due to the negative consequences for the US economy of rising prices for black gold. Will the White House master back down from his plans this time too? This would have been a catastrophe for the "bulls" in Brent and WTI, which increased the long positions in oil and oil products by 564 million barrels in equivalent for 14 weeks in a row, which is one of the longest rally figures for the entire history of accounting.
Therefore, it is quite possible that Trump hopes to bring differences to the ranks of OPEC and other producing countries. Russia is already faced with a choice, whether to lose its market share or withdraw from the contract to reduce production. Further price increases will increase the risk of terminating the agreement, which will be a strong argument for selling oil.
A technically confident breakthrough of resistance at $72.75 per barrel (61.8% of the CD wave) as part of the transformation of the Shark pattern at 5-0 increased the risks of continuing the northern rally of the North Sea variety to $78.95. The level of $72.75 becomes important to support while Brent quotes are above it, the bulls control the market situation.
Brent daily chart
The material has been provided by InstaForex Company - www.instaforex.com