Oil near multi-year highs as Iran sanctions tighten supply outlook

An oil pump jack is seen at sunset in a field outside Scheibenhard, near Strasbourg, France. The global oil market is finely balanced, with top exporter Saudi Arabia and No.1 producer Russia having led efforts to curb oil supply to prop up prices. (Reuters)
Updated 11 May 2018
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Oil near multi-year highs as Iran sanctions tighten supply outlook

  • The United States plans to reintroduce sanctions against Iran, which pumps about 4 percent of the world’s oil.
  • Many analysts expect oil prices to rise as Iran’s exports fall.

LONDON: Oil prices steadied near 3-1/2 year highs on Friday as the prospect of new US sanctions on Iran tightened the outlook for Middle East supply at a time when global crude production is only just keeping pace with rising demand.
The United States plans to reintroduce sanctions against Iran, which pumps about 4 percent of the world’s oil, after abandoning a deal reached in late 2015 that limited Tehran’s nuclear ambitions in exchange for the removal of US and European sanctions.
The global oil market is finely balanced, with top exporter Saudi Arabia and No.1 producer Russia having led efforts to curb oil supply to prop up prices.
Benchmark Brent crude was down 20 cents at $77.27 a barrel by 1330 GMT. On Thursday Brent hit $78, its highest since November 2014.
US light crude was down 10 cents at $71.26, having touched a 3-1/2 year high of $71.89 on Thursday.
Many analysts expect oil prices to rise as Iran’s exports fall.
“The up-trend remains strong and intact,” said Robin Bieber, technical chart analyst at London brokerage PVM Oil Associates.
Rainer Seele, chief executive of Austrian oil and gas company OMV, told German daily Handelsblatt that he expects prices to rise as the United States moves to reimpose sanctions.
“It is not yet clear which concrete sanctions the US will impose. But I expect the price of North Sea Brent to be closer to $80 than $70 a barrel,” Seele said in an interview.
US investment bank Jefferies said in a note on Friday that it expects Iranian crude oil exports to start falling in the next few months.
“We expect that around October Iranian exports will be down by 500,000 barrels per day (bpd) and eventually fall by 1 million bpd,” the bank said.
There are signs, however, that other members of the Organization of the Petroleum Exporting Countries (OPEC) will raise output to counter the Iran disruption.
Jefferies said that OPEC has the capacity “to replace the Iranian losses” but added: “Even if physical supply is held constant ... the market will still be faced with a precariously low level of spare capacity.”
Outside OPEC, soaring US crude oil production could help to fill Iran’s supply gap. US oil output reached another record high last week, hitting 10.7 million bpd.
That is up 27 percent since mid-2016 and means that US output is creeping ever closer to that of top producer Russia, which pumps about 11 million bpd.


Scandal-hit Korean Air chief forced off board by shareholders

Updated 1 min 37 sec ago
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Scandal-hit Korean Air chief forced off board by shareholders

  • Cho Yang-ho controls around 30 percent of Korean Air
  • The Cho family has been under scrutiny in recent years after being embroiled in multiple criminal probes

SEOUL: The head of South Korea’s flag carrier Korean Air — whose family have been embroiled in multiple scandals including one involving a “nut rage” tantrum — lost his board seat after shareholders voted against extending his term as director, the airline said Wednesday.
Cho Yang-ho, who is currently on trial for corruption, failed to secure a required two-thirds majority, becoming the first controlling shareholder of a South Korean conglomerate to be forced off the board.
The super-wealthy owners of chaebols — the sprawling conglomerates that dominate the world’s 11th-largest economy — are no strangers to controversy, but a string of high-profile scandals have vaulted the Cho family to notoriety in South Korea, even sparking protests by their employees.
The 70-year-old tycoon is the chairman of the Hanjin Group, which used to own the now-bankrupt Hanjin Shipping line.
Cho controls around 30 percent of Korean Air through its parent company Hanjin Kal.
But the National Pension Service, the airline’s second biggest shareholder, had said Tuesday it will oppose Cho’s re-election, citing his records of “undermining corporate value and infringing upon shareholder rights.”
“It is correct that he has lost his seat as the director of the board,” a Korean Air spokeswoman said.
The Cho family has been under scrutiny in recent years after being embroiled in multiple criminal probes over charges ranging from assault, embezzlement and smuggling luxury goods.
Cho is on trial for embezzling more than 20 billion won ($18 million) and unfairly awarding contracts to companies controlled by his family members.
His two daughters, who held management positions at Korean Air, previously became viral sensations for temper tantrums dubbed the “nut rage” and “water rage” scandals, forcing Cho to issue a public apology and remove them from their posts.
The elder, Cho Hyun-ah, made global headlines in 2014 for kicking a cabin crew chief off a Korean Air plane after she was served macadamia nuts in a bag rather than a bowl. She later served a short prison sentence.
Last year, her younger sister Cho Hyun-min was accused of throwing a drink into an advertising agency manager’s face in a fit of rage during a business meeting. She was not indicted as the victim did not want to press charges.
Their mother, Lee Myung-hee, has been questioned by police several times in connection with allegations of assault against her employees including cursing, kicking, slapping and even throwing a pair of scissors.
Cho himself received a suspended jail sentence for tax evasion in 2000 and is awaiting a separate trial for using 30 billion won of company funds to renovate his house.