Oil prices rose swiftly and powerfully yesterday, surpassing $75 for the first time in years after gaining $2/bbl during trading hours. While there have been a number of relevant news events – signing a NAFTA replacement, OPEC spare capacity, and slowing US production to name a few – none are causing as much of a stir for markets as Iran sanctions. WTI crude is currently hovering near multi-year highs at $75.40, a gain of 10 cents since yesterday’s close.
Fuel prices also received a solid boost yesterday, with gasoline and diesel prices up 2.6 cents and 5.6 cents, respectively. The two fuels have been moving disproportionately lately because diesel stocks are below 5-year averages, while gasoline stocks are well above average. Both are currently trading flat after yesterday’s rally. Diesel prices are currently $2.4093, up 0.1 cents and also at multi-year highs. Gasoline prices are trading at $2.1272, roughly unchanged from yesterday’s close.
Oil prices are roaring higher, and they don’t show any signs of slowing on their way to $100 according to Energy Aspects co-founder Richard Mallinson. Venezuela set the stage for a tighter oil market, stretching spare capacity thinner over the past two years; Iran sanctions are now taking markets over the edge. Saudi Arabia is struggling to find new capacity to fill the gap, keeping market tension high. The expected impacts of Iran’s sanctions vary from 500,000 barrels per day to over 2 million barrels per day. If the latter estimate proves correct, we’ll certainly see prices soaring above $100 by the end of the year.