Even without disruption to Iran's crude flows, the balance between supply and demand in the oil market has been tightening steadily, especially in Asia, with top exporter Saudi Arabia and No.1 producer Russian Federation having led efforts since 2017 to cap output to prop up prices.
Hence, ahead of EIA's inventory report which is likely to be announced shortly, we continue to advocate staying long in a December 2018 WTI $68-75/bbl call spread (net premium: $1.40/bbl).
At the time of writing, WTI was valued at $70.98 per barrel, with Brent crude coming in at $76.86 per barrel, according to Bloomberg. Those impacts will only become apparent once America's partners give their own response to Trump's decision, and when details of how the US measures are implemented are clear, the IG said. "However, there is still plenty of ambiguity, so investors are taking a wait and see approach now".
The dollar index was little changed, with the euro up 0.1 percent to $1.1850. Brent, the global benchmark, is up around 13%.
Brent for July settlement added as much as 0.7% to $77.75/bbl on the London-based ICE Futures Europe exchange. Despite the lifting of sanctions, widespread investment in the Iran's oil sector has failed to materialize, a situation that could worsen with sanctions re-imposed.
Some analysts believe that because the sanctions are less coordinated this time around, the hit to Iranian exports would only amount to a few hundred thousand barrels per day.
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Japan was one of the first countries to confirm that it will seek a waiver.
"Data drives crude markets, not expectations", Verlerger said. Israel said Iran fired missiles at its soldiers in the Golan Heights and retaliated by striking Iranian targets in Syria, bringing the Middle East nations closer to a direct conflict.
Is $100 oil on its way back?
"I don't think Saudi Arabia or OPEC will step in and contain prices at the moment", sid Hynes.
Three of the main providers of cover to Iran's main tanker fleet - Skuld, the Swedish Club and West of England Club - said they didn't want to give any further guidance beyond what they published on their websites, saying the situation remains fluid.
The United States and other powers agreed to lift some economic sanctions under the 2015 deal in return for Iran agreeing to rein in its nuclear program.
USA oil production is up about 13 percent from a year ago, but demand has been strong too. India's central bank estimates oil at $78 a barrel would shave off 10 basis points from its 7.4% forecast for gross domestic product growth in the year to March 2019. Still, BMO senior economist Sal Guatieri said prices haven't risen enough to move the needle on central bank interest rate hikes plans or to shift consumer consumption habits.