Brent and WTI futures jump as US scraps sanctions waivers for Iranian oil

Oil prices rose on Monday after the US announced that countries trading with Tehran must end all imports of crude from Iran or face sanctions.

Brent crude futures rose 2.3% to $74.31 a barrel, reaching their highest mark since 1 November,

Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil. Iran is being given VERY BAD advice by @JohnKerry and people who helped him lead the U.S. into the very bad Iran Nuclear Deal. Big violation of Logan Act?

— Donald J. Trump (@realDonaldTrump) April 22, 2019

US West Texas Intermediate (WTI) crude futures climbed around 2.9% to $65.87 per barrel in parallel and were changing hands at their loftiest level since 31 October.

The news was first reported by the Washington Post, which said the US government was expected to announce on Monday that it would scrap the sanctions waivers that had allowed some countries to continue trading with Iran.

Secretary of State Mike Pompeo later announced "we will no longer grant any exemptions - we're going to zero."

Pompeo added that the US, Saudi Arabia and the United Arab Emirates were "working directly with Iran's former customers."

Hussein Sayed, Chief Market Strategist at FXTM said: “Whether Oil prices will resume their uptrend from here on depends on Organization of the Petroleum Exporting Countries’ next move, especially given the deteriorating situations in Libya and Venezuela.

“We expect to see increasing pressure from Trump’s administration on OPEC to pump more Oil, and that’s likely to lead OPEC+ to increase output in the second half of the year. However, we may still see an additional spike in prices before the situation becomes clear.”

Before the sanctions, Iran was the fourth largest producer of oil in OPEC, with an output of almost 3.0m barrels a day. According to data from Refinitiv, thus far in April its exports had already fallen below 1.0m b/d.

The US decided to impose sanctions on Iranian oil exports after President Trump pulled out of the 2015 international nuclear deal. But it initially granted eight waivers to the sanctions which allowed limited purchases to continue for six months.

India and China were among the countries that were granted exemptions which will now be retracted, after failing in their bid to negotiate extensions. Other countries included Japan, South Korea, Taiwan, Turkey, Italy and Greece.

One person familiar with Washington's decision told Bloomberg that some of the countries which had previously obtained waivers would be granted a "brief" grace period, but did not talk of waivers per se.

According to Bloomberg data, at 613,000 barrels a day, China was the largest buyer of Iranian crude in March, followed by South Korea with 387,000 b/d, Japan at 108,000 b/d and Turkey with 97,000 b/d.

Beijing reportedly reiterated its opposition to the unilateral sanctions, claiming that the US was reaching beyond its jurisdiction.