Brent trades near four year high

SINGAPORE (Reuters) – Oil prices opened firmly on Monday, with Brent hovering close its highest in nearly four years ahead of U.S. sanctions against Iran that kick in next month.

There had been expectations China would ignore U.S. sanctions. However, China’s Sinopec (600028.SS) is halving loadings of crude oil from Iran this month, in a sign that pressure from Washington is having an effect.

“If Chinese refiners do comply with U.S. sanctions more fully than expected, then the market balance is likely to tighten even more aggressively,” Edward Bell, commodity analyst at Emirates NBD bank wrote in a note published on Sunday.

U.S. President Donald Trump called Saudi Arabia’s King Salman on Saturday, discussing ways to maintain sufficient supply once Iran’s exports are hit by sanctions.

“Until sizable supply is offered up by OPEC, ultimately traders will continue to push the envelope even more,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

“Even if they (Saudi Arabia) wanted to bend to President Trump’s wishes, how much spare capacity does the Kingdom have?” asked Innes.

“We’re going to find out very soon as approximately 1.5 million barrels (per day) of Iranian oil is effectively going offline on Nov. 4. If the market senses that Saudi Arabia capacity is tapped out at 10.5 million bpd … oil prices will rocket higher with the flashy $100 per barrel price tag indeed a reasonable sounding target,” Innes said.

Reuters Singapore

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Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes