Iran's Oil Exports Blocked: Global Market Implications
The US has reimposed its blockade on Iranian oil exports, effectively preventing Tehran from shipping crude. The reinstatement of the blockade has made Iran's oil volumes irrelevant to global market balances, according to Bob McNally, president of Rapidan Energy Group.
The blockade was lifted for about three weeks in June and early July while negotiations were being held, but it is now back in place. 'Kharg Island is not exporting anymore,' McNally told CNBC, referring to Iran's key oil export terminal that handles more than 90% of all shipments.
Brent Crude prices topped $91 per barrel this week amid heightened security concerns for shipping in the Middle East and fading hopes that the US and Iran could return to negotiations. The refined product market is already flashing severe tightness, with the diesel crack spread hitting record highs in both the United States and Europe.
The longer the disruption goes on, McNally warned, 'the risk is that crude will follow products higher.' The diesel crack spread in the US hit triple digits this week for the first time ever, with the premium over crude prices jumping to as high as $102 per barrel on Monday before easing slightly to about $100 a barrel on Tuesday.