Oil prices soar as the United States prepares to end sanction waivers
Oil markets captured the headlines on Monday, as reports surfaced that the United States will stop granting sanction waivers to nations that import crude oil from Iran. Brent crude oil hit six-month trading high on the news and soared by more than three percent, as the Trump administration looked set to end the waivers as early as next week.
West Texas Intermediate oil also jumped by more than two percent on the day, as the end of sanction waivers is perceived to be bullish for oil prices and heightens fears of a lack of supply to the oil market. Washington had previously granted Iran’s main oil buyers sanction waivers, allowing them to purchase Iranian oil for six months.
The ongoing conflict in Libya also caused oil markets to move higher on Monday, as reports surfaced that the capital city, Tripoli, had faced a series of air attacks over the weekend, which could have potentially damaged precious oil fields.
Libya is a major OPEC oil producer and has been a constant state of conflict since the end of Muammar Gaddafi’s regime in 2011. OPEC nations have also pledged to cut oil prices since the start of 2019, with Saudi Arabia leading the call for high oil prices to boost its revenue for domestic investment in alternative sectors such as clean energy.
Oil prices have increased by more than forty-five percent since January, with many economists now fearing that a further rise in oil prices could lead to problems for nations that rely heavily on oil imports such as Turkey, Japan, India, and China.
India’s economy is particularly vulnerable to any sharp rise in oil prices, as it leads to an increase in the countries current account deficit and adds to domestic inflationary pressures. Speculation is mounting that India’s central bank may soon have to reverse recent dovish policy moves to tackle rising inflation.
LCrudeJun19 Daily Mountain Chart | Source: ActivTrader
After breaking through the $65.00 level light crude oil now faces strong upcoming resistance from the $68.90 level and finally the psychological $70.00 level. A bullish break above the $70.00 level could provide the impetus for an eventual technical test of the September 2018 swing-high, at $76.88.
Written by Nathan Batchelor, External Analyst
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