ANS at lower altitude
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Crude firms up a bit on new U.S. sanctions hitting Iranian oil exports
Steve Sutherlin Petroleum News
Alaska North Slope crude jumped $1.19 April 16 to close at $68.65 per barrel, while West Texas Intermediate jumped $1.14 to close at $62.47 and Brent jumped $1.18 to close at $65.85.
Prices rose on supply disruption concerns following new U.S. sanctions on Iran's oil exports.
(See chart in the online issue PDF)
ANS was just 16 cents shy of its previous Wednesday close of $68.81 April 9, establishing a new lower trading range in the upper $60s, after notching a close of $76.26 two weeks prior on April 2. Prices slumped April 3 after the White House announcement of new U.S. import tariffs on a broad swath of trading partners.
The Trump administration escalated sanctions against Iranian oil April 16 by targeting Chinese entities, including a teapot refinery in Shandong province.
The new measures add to Trump's renewed "maximum pressure" campaign designed to reduce Iran's oil exports to zero and to curb its nuclear ambitions. The sanctions also target a "shadow fleet" -- companies and vessels facilitating Iranian oil transport.
Prices were supported earlier in the day April 16 on Bloomberg reports that China had signaled a willingness to enter tariff negotiations with the United States.
Supply side support was bolstered by an April 16 announcement by the Organization of the Petroleum Exporting Countries that it had in hand updated plans for Iraq, Kazakhstan and other countries to cut production to compensate for pumping above quotas.
U.S. commercial crude oil inventories for the week ended April 11 -- excluding the Strategic Petroleum Reserve -- rose by a modest 0.5 million barrels from the previous week to 442.9 million barrels, 6% below the five-year average for this time of year, according to U.S. Energy Information Administration data released April 16.
Total motor gasoline inventories saw a bullish drawdown of 2.0 million barrels for the period to 234.0 million barrels -- 1% below the five-year average for the time of year, the EIA said. Distillate fuel inventories fell 1.9 million barrels to 109.2 million barrels,11% below the five-year average for the time of year.
ANS drifted 24 cents lower April 15 to close at $67.45, as WTI fell 20 cents to close at $61.33 and Brent slipped 21 cents to close at $64.67.
Crude inched higher April 14. ANS added 16 cents to close at $67.69, WTI rose 3 cents to close at $61.53 and Brent added 12 cents to close at $64.88.
ANS leapt $1.24 April 11 to close at $67.53, as WTI and Brent each leapt $1.43 to close at $61.50 and $64.76 respectively.
Crude prices took a dramatic dive April 10 as the trade war between the United States and China escalated. ANS plummeted $2.52 to close at $66.29, WTI plummeted $2.28 to close at $60.07 and Brent plunged $2.15 to close at $63.33.
On April 16, ANS closed at a $6.18 premium over WTI and at a $2.80 premium over Brent.
Tariff to rock demand, prices High sustained tariffs will make waves in crude markets, according to Wood Mackenzie analysis.
"Should tariffs be imposed at anything approaching Trump's starting position, the impact on companies will be profound but may also present opportunities for the bigger players," according to Simon Flowers, Wood Mackenzie chief analyst.
"The main impact will be indirect through weaker commodity demand and prices," Flowers said in The Edge April 10, adding that Wood Mac's scenario saw a hit to global GDP growth calculated at Trump's initial position will reduce oil demand for 2026 by some 1 million bpd, and prices down in 2026 by $7 per barrel, causing Brent to average $64 for 2026.
The average Brent breakeven price would be $62 per barrel after dividend -- but before share buy-backs -- based on Wood Makenzie estimates across a peer group of 52 companies.
Most oil companies are in much better shape now than before the crude price collapse a decade ago and the 2020 pandemic, Flowers said.
Companies may have to cut capex, dividends, or both.
"So much depends on how low prices go, how long the industry expects the downturn to last, and how many levers individual companies have at their disposal to pull," Flowers said. "Buy-backs, funded by free cash flow at higher prices, will go first."
Capital expenditure has been on a tight rein generally -- as companies have purposefully seek investment flexibility over cash flow ups and downs, he said.
Balance sheets, strengthened in recent years, can help support dividends and investment for a period but very few companies can support dividends below $50 Brent, Flowers said. Adding that it is very likely that new upstream projects be delayed in the scenario.
The company's global project tracker has 28 upstream projects expected to gain final investment decisions in 2025, and another 35 in 2026, he said, adding that price volatility and capital preservation put these projects at risk of delay.
Much merger and acquisition activity will be chilled as falling prices and price volatility widen the bid-ask spread, killing smaller deals in the short-term, Flowers said.
"The bigger players will look to make the most out of a downturn," he said. U.S. Majors can use high share price ratings to build portfolios further; NOCs may look to diversify internationally."
Analysts at Citi Research expect Brent to sink to $60 near term, with support in the $60-$65 range in the second half of the year and averaging some $65 in 2026.
"Physical oil markets will likely bear the brunt of the trade tariff-related real activity shock in the coming weeks and months," Citi said in a report. "Beyond the negative effects via lower global trade, a period of uncertainty is most likely still ahead of us, leaving firms and households underspending until things become clearer, and raising the probability of an undershoot in global activity over the coming months."
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