Besides Occidental Petroleum’s bidding war with Chevron for fellow producer Anadarko Petroleum, the big energy news from last week is that President Donald Trump, as expected, moved to end all sanction waivers for nations that import Iranian oil. Starting in May, countries that still buy oil from Iran could face U.S. penalties. In response, Brent crude hit $75 per barrel for the first time in six months.
Oil and natural gas are the Middle Eastern country’s most important export, so the policy is intended to hit Tehran where it hurts. The plan, announced last summer, appears to be working so far. Between January 2018 and January 2019, Iranian oil exports fell by nearly 700,000 barrels per day (b/d). (The data could be inaccurate, though, since Iranian oil tankers are believed to be turning off their transponders in an effort to conceal themselves from satellite tracking systems.)
U.S. Sanctions Have Steadily Shrunk Iran’s Oil Exports
U.S. GLOBAL INVESTORS
It’s unlikely that all countries will immediately zero-out imports from Iran. I would be surprised to see China, the number one consumer, trim its imports much further. Iran is such a key strategic player connecting Asia and the Middle East as part of China’s Belt and Road Initiative (BRI).
So who will pick up the global slack if Trump’s plan succeeds and Iranian exports go offline? Trump suggests Saudi Arabia and the United Arab Emirates (UAE) will. Secretary of State Mike Pompeo also believes the U.S. can, but this would “be a stretch,” according to Bloomberg.
The United States Oil Fund LP (USO) was trading at $13.31 per share on Tuesday afternoon, up $0.08 (+0.60%). Year-to-date, USO has gained 10.82%, versus a 10.56% rise in the benchmark S&P 500 index during the same period.
USO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 108 ETFs in the Commodity ETFs category.
This article is brought to you courtesy of Forbes.
