- Oil is trading lower around $82.45, extending losses from last week
- Last week, prices fell by more than $2.50/Bbl as geopolitical risk premium eased somewhat following an Iranian attack on Israel and the subsequent Israeli response
- US unlikely to enforce sanctions on Iran this year (BBG)
- According to Energy Aspects, the US may wait to implement new sanctions on Iranian crude exports as it seeks to avoid higher energy prices this year
- Legislation was recently passed that would expand the scope of current sanctions on Iran to include foreign ports, vessels, and refineries that use or transport crude from Iran
- Enforcing these sanctions may be difficult as more than half of Iran's crude exports are shipped to China’s independent refineries, which operate outside the US financial system
- If the new sanctions are implemented, 200-500 MBbl/d of exports could be affected, out of a total of 1.2-1.5 MMBbl/d
- Medium-sour crude grades have been trading higher (BBG)
- Middle-Eastern varieties of medium-sour crude have been fetching a higher premium in the spot market
- This reflects underlying changes in the supply-demand balance of the crude market, as OPEC has significantly reduced the supply of these grades of oil
- Another contributing factor is that while demand for diesel has been weak, demand for fuel oil has increased, driven by seasonal factors
