More Gains for Crude Trigger More Talk of Triple Digit Prices

The impact of the Iran sanctions are of increasing concern to analysts. File Image / Pixabay

Once more, the prospect of triple-digit oil prices was mentioned again, as U.S. crude prices on Friday settled above $74 for the first time in four years - supported by concern over the U.S. sanctions against Iran and the notion other major producers won't be able to make up for the resulting exporting shortfall.

West Texas Intermediate ended Friday's session up 70 cents, at $74.15, its best closing price since November of 2014, while Brent rose $1.59 to $79.44.

None of this was a cause for celebration in analytical circles: Dominick Chirichella, director of risk management at EMI DTN, worried that "All the potential shortfalls could outstrip the production increase agreed to by OPEC [the Organization of the Petroleum Exporting Countries] and Russia."

Abhishek Kumar, analyst at Interfax Energy, added, "It is becoming increasingly clear that Saudi Arabia and Russia will struggle to compensate for potential losses in oil production from the likes of Venezuela, Iran, and Libya."

For the record, Libya's National Oil Corporation on Friday said it expects to declare force majeure on loadings from eastern ports, raising output losses to 800,000 barrels per day (bpd).

But neither Chirichella nor Kumar elaborated on why major producers would "struggle" to compensate for loss of production in other regions, nor did they acknowledge several factors that would prove their predictions wrong, such as the possibility that some production losses - such as those in Libya - could be extremely short-lived, and the likelihood that many countries such as China and India will continue to purchase Iranian oil despite pressure from the U.S. not to do so.

However, perhaps caught up in the spirit of impending chaos, JBC Energy said the more the U.S. enforces its sanctions, the higher the price of oil will go: "Triple-digit oil prices are not off the table," it stated.

Left undiscussed - at least in mainstream media circles - is evidence that U.S. president Donald Trump's sanctions may be having the desired effect of rendering the Islamic's current regime unstable and therefore susceptible to agreeing to a new nuclear deal that is more favourable to western interests: the plummeting rial is reportedly causing protests from shop-owners, and as the country's economic picture worsens, the movement looks likely to pick up strength.

CNBC stated that demonstrators shouted slogans critical of the regime in Tehran like "Death to dictator" and "Let go of Syria and think about us"; the news agency also noted that Iran is headed for "severe economic pain" as the sanction by August will reimpose curbs on trading of the country's gold, steel, coal, cars, currency and debt, as well as freeze Iran's ability to buy U.S. dollars.

Earlier this week, Reuters made a case for why Russia and the Saudis are rapidly becoming the rulers of the global oil market, even though compelling evidence suggests the real contender for that distinction is the U.S. under Trump.