New Sanctions Against Iran and Russia Likely to Increase Oil Prices

Oil prices in global markets reached their highest level in the past three weeks; Reuters cited the main reasons for this price increase as the likelihood of new sanctions against Iran and Russia. On Friday, December 23, the price of Brent crude oil rose by about 1.5% to $74.49 per barrel, the highest price since December 2. The price of West Texas Intermediate (WTI) crude oil also increased by nearly 2% to $71.29 per barrel, the highest since November 17. According to analysts at Ritterbusch, the first reason for this price increase is the potential for stricter sanctions against Russia and Iran, followed by other reasons such as increased supportive policies in China's economy, political turmoil in the Middle East, and the possibility of interest rate cuts in the U.S. The three European countries involved in the JCPOA have stated that they are prepared to activate the "snapback mechanism" or immediately reinstate all international sanctions against Tehran if necessary to prevent Iran from acquiring nuclear weapons. Based on UN Security Council Resolution 2231, which endorsed the JCPOA, the parties to the nuclear agreement with Iran can activate the so-called "snapback mechanism" to restore UN sanctions against Tehran by early fall next year. On the other hand, the European Union is set to implement its fifteenth sanctions package against Russia due to its attack on Ukraine in the coming days, targeting vessels known as the "phantom fleet." The United States is also considering similar actions. Meanwhile, Reuters reported that China, the world's largest crude oil importer, has increased its oil purchases. According to this report, China's oil imports in November (last month) saw annual growth for the first time in seven months, and this trend is expected to continue in the coming months. Last month, it was reported that the price of Iranian crude oil exported to China reached its highest level in five years, as U.S. sanctions have increased transportation costs. Donald Trump, the elected President of the United States, has stated that he will resume the maximum pressure policy against Iran upon returning to the White House. The Wall Street Journal also reported on other options being considered by Trump's transition team regarding Iran.