Europe Wrestles with Iran Sanctions

Europe faces a choice: fight US sanctions and continue buying oil from Iran, or cave to US pressure? Early signs are the EU will fight. The European Commission has reopened the 1996 Blocking Statute that prohibits EU companies from observing US extraterritorial sanctions and is considering paying Iran for its crude oil in euros. On the face of it, the Blocking Statute has teeth – yet implementing it would be messy. It will do little to blunt the impact of US sanctions, but as a negotiating tool it could help Europe extract concessions from President Trump.
Monthly Permian production growth (conventional and shale) has averaged almost 70,000 b/d since the start of the year.  But by this summer, ESAI Energy expects this growth will face increasing pressure from full pipelines and labor shortages. The pressure will last through the next twelve months, until additional takeaway capacity starts to come online.

Market Alert: Year-Round E15

The latest talks over the RFS resulted in the announcement that the Trump administration will allow E15 gasoline to be sold year-round. Although policy details remain unclear, this development will move the RIN market into surplus, reduce D6 RIN prices, increase blending of ethanol into the gasoline pool at the expense of petroleum based components, and temper the recent crude-led rise in gasoline prices.

Iran’s crude exports to fall by 300,000 BPD in 2018

Kallanish Energy:
There remains a lot of uncertainty regarding what comes next after the U.S. Treasury reinstates economic sanctions on Iran and the possibility of exemptions or some sort of “special treatment” to allies in Europe.

But for now, U.S. research and consulting firm ESAI Energy forecasts the sanctions will reduce Iranian crude oil exports by roughly 300,000 barrels per day (BPD) by late this year.

French Election is Victory for Europe

In the realm of international relations and U.S. foreign policy, an integrated Europe allied to the U.S. is seen as a plus for concerted action to counteract instability in regions such as the Middle East, North Africa and even the Balkans. The election of independent, centrist, Emmanuel Macron, to the French Presidency over the weekend was a clear victory for Integrated Europe as Macron ran on a pro-Europe platform.

Tensions with North Korea Becoming Critical Threat to Oil Markets

The strategic situation between the United States and North Korea is approaching an inflection point. The
U.S. decision of whether to attack North Korea before it develops an intercontinental strike rides on its belief
in the strength of mutual nuclear deterrence. But, North Korea is seeking to close what they perceive as an
almost seventy-year-old window of vulnerability. The U.S. may decide (with the encouragement of its allies)
to act before that window closes. The possibility of military conflict is growing and will materially impact key
oil consumers, South Korea and Japan, among others.

Stalemate Will Limit Libyan Production

Libya will not solve its own problems in 2017. And although international actors, including the US and Russia, have military presence in the country, their influence will not the tip scales toward national resolution or in favor of any faction. Continued violence and the undermining of the National Oil Company will keep oil production fluctuating between 400,000 b/d and 800,000 b/d for the foreseeable future.

Trump and a New Cold War in the Middle East

Trump Administration statements after the missile strike on Syria indicated a broad change in policy regarding the future of the Assad regime in Syria. Whether this is followed by other military, economic, or political actions remains to be seen. But, we have entered a new era in the Syrian civil war, which signals a subtle but important change in the new Cold War in the Middle East.