Jake FoxOil prices are climbing again, with the United States Oil Fund (AMEX:USO) up 2.77% to 134.54 dollars, closer to its 52 week high of 142.33 than its low of 102.42, as traders weigh the question that keeps surfacing in Middle East flare ups: does Iran have oil, and if so, why isn't it moving markets the way it used to?
| Price | 134.54 USD |
|---|---|
| Day change | +3.63 (+2.77%) |
| 52-week range | 102.42 – 142.33 |
| RSI (14) | 61.38 |
| Volume | 4,434,181 |
Does Iran have oil to sell right now
Iran sits on some of the largest crude reserves on the planet, but having oil in the ground and getting it to buyers are two very different things. According to Bob McNally, president of Rapidan Energy Group, a reinstated blockade in the Gulf of Oman has effectively cut off Tehran's exports. Kharg Island, the terminal that normally handles more than 90% of Iran's oil shipments, has gone quiet. McNally told CNBC this week that Iran has essentially dropped out of the barrel count that traders use to gauge global supply.
Why the blockade came back
Washington had lifted the blockade for roughly three weeks in June and into July while the two sides tried to hammer out what McNally called a deal to make a deal. That effort collapsed, hostilities resumed, and the blockade snapped back into place. The renewed pressure has choked off the flow of Iranian barrels just as broader tensions in the region remain elevated, with shipping companies growing warier about transiting the Strait of Hormuz.
Futures may be underpricing the risk
Even with Iranian exports sidelined, McNally argues that crude futures aren't fully reflecting how tight the market has become. He points to the refined products market as the more honest signal. The diesel crack spread, essentially the premium refiners earn over crude, hit triple digits in the United States for the first time ever this week, spiking to around 102 dollars a barrel on Monday before easing slightly to near 100 dollars on Tuesday. Europe saw a similar record spike. That kind of squeeze in diesel, McNally said, suggests the physical market is far tighter than crude futures alone would indicate.
Brent's move and the Hormuz question
Brent crude pushed above 91 dollars a barrel this week as security worries mounted and hopes faded for a near term return to U.S. Iran talks. McNally said sentiment has shifted toward pessimism about any quick reopening of the Strait of Hormuz, and the longer that disruption drags on, the more likely crude prices are to catch up with the sharp gains already seen in diesel and other refined products.
Frequently Asked Questions
Does Iran have oil?
Yes, Iran holds some of the world's largest proven crude reserves, but a U.S. backed blockade has currently stopped most of its exports from reaching international buyers.
How did Iran get oil?
Iran's oil comes from vast reserves beneath its own territory, particularly in the southwest near the Persian Gulf, developed over more than a century of domestic drilling and production.
How does Iran get oil?
Iran extracts crude from onshore and offshore fields using its state controlled oil industry, then moves it primarily through the Kharg Island export terminal for shipment abroad.
When did Iran get oil?
Commercial oil production in Iran dates back to 1908, when the first major Middle Eastern oil discovery was made at Masjed Soleiman.
How does Iran have oil?
Iran's geology places it atop enormous sedimentary basins rich in crude and natural gas, reserves that have made it a major producer for well over a century despite recurring sanctions and blockades.
James Stephens
Edward Byrd