Oil prices shoot to 2019 highs on US Iran sanctions move

Oil prices shoot to 2019 highs on US Iran sanctions move

oil prices
File photo of section of an oil platform in the North Sea, around 160 kilometres east of Aberdeen, Scotland. (Photo: AFP/POOL/ANDY BUCHANAN)

LONDON: World oil prices struck fresh 2019 highs on Tuesday (Apr 23) after the US cracked down on Iranian oil exports while stock markets were buoyed by a raft of positive US corporate results.

Oil prices shot up on Monday after the White House announced it would end six-month waivers that had exempted numerous countries from US sanctions for buying Iranian oil.

READ: US to end all waivers on imports of Iranian oil, crude price jumps

They continued upwards on Tuesday, with Brent North Sea crude reaching US$74.70 per barrel, the highest point since early November, before falling back slightly.

WTI hit a similar near six-month high at US$66.45.

On the first day of trading after the Easter break, London's benchmark FTSE 100 rose 0.9 per cent, buoyed by the oil majors.

"UK markets have returned from their long break with solid gains for the FTSE 100, led by strength in oil stocks thanks to the surge in crude prices over the past 24 hours," noted Chris Beauchamp, chief market analyst at IG trading group.

Meanwhile US giants including Twitter, Coca-Cola, United Technologies and Verizon revealed better-than-expected first quarterly earnings, sending Wall Street higher.

However analyst Patrick O'Hare of Briefing.com said traders could still be holding fire ahead of more results for American behemoths this week.

"The blue chip results are nice to see, yet this market is probably waiting on a stronger directional cue from the response to earnings reports from Facebook and Amazon later in the week," he said.

Other major US firms releasing earnings this week include Microsoft, Exxon Mobil, Tesla, and Boeing - it will be the aerospace giant's first such report since a deadly Mar 10 plane crash plunged the company into crisis.

Optimism was further boosted after the US government reported new homes sales surged by 4.5 per cent in March, defying expectations.

European markets followed Wall Street's lead, closing higher on Tuesday after mixed trading in Asia.

Separately, Sri Lanka's stock market slumped 3.6 per cent as the Colombo Stock Exchange reopened for trading after terror attacks on Easter Sunday killed more than 320 people.

US$80 OIL A 'POSSIBILITY'

The White House's announcement means that eight countries - China, India, Turkey, Japan, South Korea, Taiwan, Italy and Greece - will face sanctions starting in May if they continue to buy oil from Iran.

"This points to a big drop in the supply side, which boosts the commodity's price," said Margaret Yang Yan, market analyst at CMC Markets Singapore.

"Iran's daily oil output amounts to 1.3 million barrels, according to latest figures in end-March."

Stephen Innes, head of trading and market strategy at SPI Asset Management, said rising crude prices meant US$80 per barrel was now a "possibility".

"Oil quickly re-priced higher on fears that markets could face an immediate supply crunch, adding more pressure to the already tenuous global supply squeeze," he added.

Energy and oil-linked shares jumped on Tuesday, with Tokyo-listed crude developer Inpex rallying 2.8 per cent and oil refiner JXTG up 1.1 per cent.

In London, BP shot up 2.7 per cent and Shell 2.3 per cent.

Key figures around 1540 GMT:

London - FTSE 100: UP 0.9 per cent at 7,523.07 points (close)

Frankfurt - DAX 30: UP 0.1 per cent at 12,235.51 (close)

Paris - CAC 40: UP 0.2 per cent at 5,591.69 (close)

EURO STOXX 50: UP 0.1 per cent at 3,503.85 (close)

Tokyo - Nikkei 225: UP 0.2 per cent at 22,259.74 (close)

Hong Kong - Hang Seng: FLAT at 29,963.24 (close)

Shanghai - Composite: DOWN 0.5 per cent at 3,198.59 (close)

Euro/dollar: DOWN at US$1.1210 from US$1.1261 at 2050 GMT Monday

Pound/dollar: DOWN at US$1.2939 from US$1.2981

Dollar/yen: DOWN at 111.89 from 111.95

Oil - Brent Crude: UP 53 cents at US$74.57 per barrel

Oil - West Texas Intermediate: UP 89 cents at US$66.45 per barrel

Source: AFP/de

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