Oil prices at 2019 high as Trump takes aim at Iran

The cost of Brent crude oil has surged to its highest level since last November after the US signalled it was to step up economic pressure on Iran.

The Trump administration had announced on Monday that major buyers of Iranian oil including Japan, South Korea, Turkey, China and India must cease their purchases by 1 May.

Eight countries in all had, last November, been given a six month exemption from new US sanctions against Iran that were imposed when Donald Trump pulled the US out of the 2015 Iran nuclear accord.

The so-called sanction waivers effectively gave the nations more time to find alternative sources of supply.

The US said any country importing Iranian oil after 1 May faced the prospect of sanctions themselves.

A statement said: "This decision is intended to bring Iran's oil exports to zero, denying the regime its principal source of revenue."

The move prompted oil prices to hit levels not seen since last November despite analysts saying there was plenty of spare capacity to satisfy demand.

However, a note by Barclays said the decision would "lead to a significant tightening of oil markets" and posed a "material upside risk" to its forecast of a $70 a barrel average for 2019.

Brent Crude topped $74.50 a barrel - rising almost 1% when trading resumed in Asia and Europe after the Easter break.

According to figures produced by data specialists Refinitiv, Iran pumped only one million barrels per day in April.

Before sanctions were reimposed, it had been producing three million barrels - making it the fourth-largest member of the OPEC group of oil-producing nations.

Ellen Wald, non-resident senior fellow at the Global Energy Centre of the Atlantic Council, told Reuters news agency the US "expect" Saudi Arabia and the United Arab Emirates to replace the Iranian oil.

But she added: "This is not necessarily the way Saudi Arabia sees it".

Any move by the kingdom and its OPEC allies to raise production could place price rises at risk given shaky global demand and the likelihood it would prompt US shale producers to follow suit to maintain market share.

Neil Wilson, chief market analyst at Markets.com, said: "Suddenly we're back to supply uncertainty being a graver threat than demand uncertainty.

"This risks a very real prospect of an abrupt spike in prices if there is not enough supply to fill the gap.

"It is no guarantee that Saudi Arabia can simply open the taps, moreover having made that mistake last year ahead of the sanctions being imposed, the country will seek clear evidence that it needs to raise output before doing so.

"Risks seem skewed to the upside for oil and we may see a pop higher still. Brent was last just below $74, but a return to $80 seems eminently possible now, particularly given the short time frame allowed for countries to meet the May deadline."