SINGAPORE (Reuters) – Oil prices were torn on Thursday, supported by tightening sanctions against Iran announced this week and pressured by a surge in U.S. supply and concerns of an economic slowdown.
Brent crude futures were at $74.60 per barrel at 0512 GMT, 3 cents above their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $65.80 per barrel, 9 cents below their previous settlement.
Crude futures rose to 2019 highs earlier in the week after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action from Washington.
“Following the U.S. decision to toughen its sanctions on Iran … we have revised up our end-year forecast for Brent crude from $50 to $60 per barrel,” analysts at Capital Economics said in a note.
U.S. sanctions against Iran have denied its government more than $10 billion in oil revenue since President Donald Trump first announced the move last May, a U.S. official said on Thursday during a media call.
“Before sanctions … Iran generated as much as $50 billion annually in oil revenue. We estimate that our sanctions have already denied the regime more than $10 billion since May (2018),” said Brian Hook, U.S. Special Representative for Iran and Senior Policy Advisor to the Secretary of State.
The U.S. decision to try and bring down Iran oil exports to zero comes amid supply cuts led by producer Organization of the Petroleum Exporting Countries (OPEC) since the start of the year aimed at propping up prices.
As a result, Brent crude oil prices have risen by almost 40 percent since January.
Despite this, Capital Economics said “we still expect oil prices to fall this year as sluggish global growth weighs on oil demand, U.S. shale output grows strongly and investor aversion to risk assets like commodities increases.”
In Asia, South Korea’s economy unexpectedly shrank in the first quarter, the Bank of Korea said on Thursday, marking its worst performance since the global financial crisis.
China’s Premier Li Keqiang saying on Wednesday that his nation’s economy “still faces downward pressure”.
On the supply side, U.S. crude oil production has risen by more than 2 million barrels per day (bpd) since early 2018 to a record of 12.2 million bpd currently, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.
In part because of soaring domestic production, U.S. commercial crude oil inventories last week hit a October 2017 high of 460.63 million barrels, the Energy Information Administration said on Wednesday. That was a rise of 1.3 million barrels.
(GRAPHIC: U.S. oil drilling, production & storage levels link: tmsnrt.rs/2DxgF8W).
Reporting by Henning Gloystein; Editing by Kenneth Maxwell and Tom Hogue
Our Standards:The Thomson Reuters Trust Principles.