Escalating geopolitical tensions in Iran following the official start of the European Union embargo on July 1 should add further support for rising oil prices in the third quarter, Gordon Kwan, the Hong Kong-based head of energy research at Mirae Asset Securities, said today in a research note.
Brent crude rose 3.4 percent to $100.68 a barrel on July 3, the highest close in more than a month, and traded as high as $100.95 yesterday in London before retreating to a close of $99.77 in London. Futures for August rose as much as 20 cents a barrel today on the ICE Futures Europe exchange.
“Despite the global economic turmoil, we believe oil prices will stay elevated due to supply constraints. The gradual withdrawal of Iranian volumes, together with increased third- quarter summer demand, should help Brent crude price find support at above $100 a barrel,” Kwan said in the report.
OPEC oil production fell from the highest level in more than three years as Iranian output dropped to a 20-year low last month, according to a Bloomberg survey.
A labor strike in Norway, geopolitical tension between Turkey and Syria and the hurricane season in the Gulf of Mexico may lower global oil supply by 1 million barrels a day during North America’s summer driving season, according to Kwan.
Output in Iran, the Organization of Petroleum Exporting Countries’ second-biggest producer after Saudi Arabia, declined by 65,000 barrels to 3.16 million barrels a day in June, the lowest since June 1992, the Bloomberg survey showed. The Saudis cut output by 70,000 barrels a day to 9.83 million from 9.9 million barrels in May, the highest level since at least 1989.
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