Oil Market Jumps as US Sends Ships to Iran, Imposes New Sanctions

By Adedapo Adesanya

The oil market soared by almost 3 per cent on Friday after US President Donald Trump made new threats against Iran, a member of the Organisation of the Petroleum Exporting Countries (OPEC).

The price of the Brent crude futures went up by $1.82 or 2.8 per cent to $65.88 a barrel and the US West Texas Intermediate (WTI) crude futures gained $1.71 or 2.9 per cent to trade at $61.07 per barrel.

President Trump piled pressure on Iran through more sanctions on vessels that transport its oil and also said an American “armada” is heading towards the Middle East and that the US is monitoring Iran closely.

The US on Friday imposed sanctions on nine vessels and eight related firms involved in transporting Iranian oil and petroleum products.

Iran is OPEC’s fourth-biggest crude oil producer behind Saudi Arabia, Iraq and the United Arab Emirates, producing about 3.2 million barrels per day.

It is also a major exporter to China, the world’s second-largest oil consumer, which could face worries on top of higher prices for Venezuelan crude now that the US manages the exports of the South American nation.

Earlier this month, Mr Trump announced 25 per cent tariffs on any country doing business with Iran in a bid to pressure the government in Tehran amid large-scale protests in the country.

The US President had pulled back from attacking Iran two weeks ago, despite promising “help is on its way”, but was also urged to hold back by the Gulf states, who warn that any action may destabilise the tense region.

However, the US is now sending “a lot of ships going that direction, just in case,” President Trump said as he returned from the World Economic Forum in Davos.

Additional air defence systems are being deployed, most likely around US and Israeli airbases. The United Kingdom said it would send RAF Eurofighter Typhoon jets from 12 Squadron to Qatar, at its request.

The escalating pressure has caused concerns of oil supply disruptions in the Middle East.

Also boosting prices, Kazakhstan, an OPEC ally, has been struggling to resume output from one of the world’s largest oilfields. Chevron  said oil output at the Tengiz oilfield has yet to resume after Chevron-led operator Tengizchevroil announced a shutdown on Monday following a fire.

Market analysts at JP Morgan said on Friday that Tengiz, which accounts for nearly half of Kazakhstan’s production, could remain offline for the rest of the month and that Kazakhstan’s crude output is likely to average only 1 million to 1.1 million barrels per day in January, compared with a usual level of around 1.8 million barrels per day.