Oil prices settled at their highest in over a week on Friday after US President Donald Trump ratcheted up pressure against Iran through more sanctions on vessels that transport its oil, and announced an armada was heading towards the Middle Eastern nation.
Brent crude futures rose $1.82, or 2.8 per cent, to settle at $65.88 a barrel, the highest since January 14. US West Texas Intermediate crude gained $1.71, or 2.9 per cent, at $61.07, also a more than one-week high.
Both benchmarks notched weekly gains of over 2.5 per cent.
Trump’s statements renewed warnings to Tehran against killing protesters or restarting its nuclear program. The escalating pressure has caused concerns of oil supply disruptions in the Middle East. Kazakhstan has been struggling to resume output from one of the world’s largest oilfields.
Warships, including an aircraft carrier and guided-missile destroyers, will arrive in the Middle East in the coming days, a US official said. The United States conducted strikes on Iran last June.
US hits vessels, firms with sanctions
The US on Friday also imposed sanctions on nine vessels and eight related firms involved in transporting Iranian oil and petroleum products, the US Treasury said in a statement.
At about 3.2 million barrels per day according to OPEC figures, Iran is OPEC’s fourth-biggest crude oil producer behind Saudi Arabia, Iraq and the United Arab Emirates. It is also a major exporter to China, the world’s second-largest oil consumer. Chevron said oil output at Kazakhstan’s Tengiz oilfield has yet to resume after Chevron-led operator Tengizchevroil announced a shutdown on Monday following a fire.
The incident exacerbated problems for Kazakhstan’s oil industry, already challenged by bottlenecks at its main exporting gateway on the Black Sea, which has been damaged by Ukrainian drones.
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 bpd in January, compared with a usual level of around 1.8 million bpd. Oil prices climbed earlier in the week on Trump’s moves on Greenland, but dropped by about 2 per cent on Thursday as he backed off tariff threats against Europe and ruled out military action. Trump said on Thursday that Denmark, NATO and the US had reached a deal that would allow “total access” to Greenland.
