Oil is on track for a second consecutive week of gains, after two months of losses. Oil prices have climbed 10 percent in the past two weeks, and the big question is whether or not the momentum can continue.
The reasons for the recent rebound are multiple. First, from the perspective of the physical market, there have been recent bullish data points that suggest the market is tightening. The latest EIA report revealed a surprisingly strong decline in crude oil inventories, gasoline inventories and also higher gasoline demand. Oil prices popped on the news.
Iran is also back on the front burner. The U.S.-China trade war and the Turkish lira crisis have sucked up a lot of oxygen this summer, but the countdown to the implementation of oil-related sanctions on Iran continues.
The Wall Street Journal reported that Iran’s oil exports are falling much faster than most analysts had predicted. While China and the European Union have vowed to continue to help Iran export its oil, it’s an uphill climb for Tehran to prevent supply losses. Banks are backing away from involvement in the trade of Iranian oil, and shippers are having trouble finding insurance for cargoes. European refiners, despite political support for Tehran in Brussels, have already moved to sharply cut purchases of Iranian crude.
The result is that Iran’s oil exports are set to plunge this month, after more modest losses in July. The WSJ says, citing data from SVB Energy International, that Iran’s oil exports could fall to 1.66 million barrels per day (mb/d) in August, a massive decline from 2.34 mb/d in July. The consultancy says that Iran’s oil exports could continue to fall precipitously over the coming months, falling as low as 0.8 mb/d in November.