WTI crude oil (CL) 30-minute chart after the US NFP release. Source: TradingView.
Middle East Tensions Keep Iran Supply Risk in Play
It comes as no surprise that Netanyahu is continuing to push for big brother USA into full confrontation against Iran. This was flagged by The Iranian security secretary 2 weeks ago.
Price action has been interesting. We started last week holding on to Iranian risk premium, about $64.50. After Wednesdays mixed US labour data (headline good, revisions bad) equities moved lower, dragging oil lower.
I am not convinced that oil should be as cheap as it is at these spot levels on Monday $62.50 (WTI 10am Monday 16th Feb). Despite my stated desire to buy a pullback at $60.91 – basically too cheap given the macro picture.
Conflict risk premium can not be fully priced out. America is sending a second battle group of ships to the region.
This time, Iran are offering to soften on Nuclear talks, should The US soften on oil sanctions. This is extremely unlikely given that US/Israeli talks last week focused on increasing economic sanctions on Iran.
Should that change however, here are the numbers:
Roughly 1.6 mb/d of Iranian crude and condensate exports are currently sanctioned, though much of it still moves primarily to China via a shadow fleet.
Iran is producing around 3.2 mb/d of crude, below its technical capacity.
If sanctions were fully lifted, Iran could likely return 0.8–1.3 mb/d of additional supply within 12 months, potentially pushing output back toward 4.0 mb/d.
So the real risk to additional supply would be a moderate addition of 1.6 to 2 mbpd.
