The second phase of the reimposition of the US sanctions on Iran’s energy, banking and insurance sectors will continue to test the oil markets throughout the winter months, MUFG Bank said in a recent report.
“With oil prices capping their worst month in October 2018 in more than two years, the ongoing elevated geopolitical tensions stemming from the uncertainty in the speed and magnitude of disruptions to Iranian oil supply in the months ahead remains entrenched on the front-end of the oil price curve, and thus will continue to test oil markets throughout the winter months,” it added.
Earlier this year, American president Donald Trump pulled United States out from a 2015 agreement that saw Iran limit its nuclear activities in exchange for sanctions relief. As a result, the country reinstated sanctions on Iran.
“Since the US withdrew from the nuclear agreement in May, Iranian exports have fallen by 34.7 percent to currently stand at 1.6 million barrels per day (bpd). The last time sanctions were imposed between 2012-15, Iranian exports fell by nearly 1.2 million bpd,” the report said.
The report expects that Iranian exports will likely to drop further in the coming months. “We view that an additional sizeable 300-350k bpd of Iranian crude off could be taken off the market in the winter months ahead.”
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