US Threatens New Sanctions Against Iran, Driving Up Oil Prices

The release of news regarding the potential imposition of new sanctions against Iran by Donald Trump, the President of the United States, led to an increase in oil prices in global markets on Friday. According to Reuters, analysts believe that comments made by Alexander Novak, the Russian Minister of Energy, regarding oil-producing countries reducing their output in December according to the commitments of the agreement, also contributed to the rise in oil prices. On Thursday, Reuters reported, citing informed sources, that the Trump administration is preparing to impose new sanctions against several Iranian entities due to the country's ballistic missile tests. These informed sources, who are aware of the Trump administration's plans, stated that the new sanctions package has been crafted in a way that will not violate the 2015 Iran nuclear deal. Concerns about supply in global markets increased when the Russian energy minister stated that global oil production fell by 1.4 million barrels per day last month following an agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other non-OPEC producers. Novak also mentioned that Russian companies might accelerate their production cuts even faster than the agreement made with OPEC, and he expects the market to rebalance by mid-year. The National Australia Bank announced on Friday that oil prices have risen by about 15% since OPEC and non-OPEC producers agreed to cut production in December. The note added, 'We now expect oil prices to be around $50 to $60 in the first and second quarters of the year, and slightly above $60 by the end of 2017, stabilizing around this range in 2018.' Meanwhile, an analyst from the International Energy Agency told CNBC that it is ambitious to think that oil prices could reach $65 per barrel. However, on Friday, oil prices reached about $57. Neil Atkinson, head of the oil industry and markets division at the International Energy Agency, stated on Friday that despite the OPEC and non-OPEC agreement to cut production and increase prices, it is unrealistic to expect oil prices to stabilize at $65 per barrel in the short term. Global oil prices have also been fluctuating over the past month. Last November, OPEC and non-OPEC countries agreed to reduce daily production by 1.2 million barrels to strengthen the market and increase prices, as well as to overcome three consecutive years of declining investment. In early December, some non-OPEC producers, including Russia, joined this agreement and committed to reducing production by 600,000 barrels per day. This agreement is for six months, and according to Reuters estimates, OPEC has fulfilled 82% of its commitments in the first month, January.