UK Oil

09:03, 24 April

Moves to Six Month High Above $74 on Iran Waivers

In the last couple of days oil has surged higher to reach its highest level in six months as it has comfortably moved past the key level at $71. For the last couple of weeks oil has consolidated and traded in a very narrow range right above the $71 level having moved through this level for the first time in many months. 
Throughout February and March oil was trading in a narrow range meeting resistance at another key level of $68 and did well to finally surge higher through this level several weeks ago.

The $68 level will sit on the sidelines and possibly be called upon to offer some support should oil decline from its current levels. It has dropped sharply a few times in the last few months, however it has enjoyed a very solid start to the year rallying from 16 month lows below $50 at the end of last year, back up to the key $58 and $71 levels and beyond, after its doom and gloom to close out 2018. The $68 level has played a significant role in the last few months which is why it may provide some support in the near future.

Starting at the beginning of October, oil fell sharply from its multi-year high above $86 down to its lowest levels in 12 months below $58 at the end of November before falling lower to 18 month lows in late December. For several weeks, oil was able to find some much needed support from around $58 and enjoy a reprieve from the immense selling pressure which has dominated it for the last couple of months prior. Oil has certainly turned this powerful selling around regaining much of the lost ground to close out last year.

Oil has continued to be influenced by several external factors, mainly ongoing concerns about global growth and where the global economy is heading, as well as Organization of the Petroleum Exporting Countries (OPEC) supply cuts. However more recently, oil prices have surged higher after the United States announced that all Iran sanction waivers would end by May, which would in turn pressure importers to stop buying from Iran. Last year before sanctions being reimposed, Iran was the fourth-largest producer among OPEC at almost 3 million barrels per day (bpd), however their April exports have shrunk well below 1 million bpd. The United States have now demanded that purchasers of Iranian oil cease by the 1st May or face sanctions themselves. This demand ends a previously in place waiver allowing some of the largest buyers to continue to purchase without penalty. It is widely expected that this move will lead to a further tightening in oil markets, and will only add to the current supply woes due to potential issues in Libya, the Venezuelan sanctions and existing OPEC cuts.