Market Overview

New Sanctions in Iran Boost Oil Prices

Brent crude oil continued a steady increase Tuesday morning in response to escalating tension in the Middle East and investor fears of supply interruption. Brent traded at 114.61 on Tuesday, a boost from Monday's prices as pressure between the West and Iran continues to build.

In an effort to derail Tehran's nuclear development program, the U.S. and European Union have introduced new sanctions on Iran's oil. The country's economy was already feeling the pressure from past oil sanctions, but refused to halt its nuclear program over the financial squeeze. These new sanctions are focused on Iran's industrial, shipping and banking sectors.

Many see the new sanctions, which came days after Iran agreed to talks on halting uranium enrichment programs if given the means for a research reactor, as further conflict in the region. With fighting between Syria and Turkey already creating support for oil prices, news out of Iran simply adds fuel to the fire.

With geopolitical worry supporting prices, Reuters reported on Tuesday that although pressure in the region is keeping prices buoyant, realistically there is no shortage of oil. Between inventory levels being at their highest and Saudi Arabia's output, the world is not lacking for oil.

This, coupled with the world's largest economies showing signs of slowing, has many saying the demand will not outweigh the supply even with further supply interruptions from the Middle East. China, the U.S. and Europe are all battling flagging growth and struggling economies.

As the top consumers, their recent lack of growth has forecast low future demand for oil. This sentiment has mitigated Brent crude's gains thus far. The balancing act between supply and demand is expected to keep Brent trading between $110 and $118 over the next two weeks.

Posted-In: News Commodities Forex Global Markets Best of Benzinga

 

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