Oil prices shoot to 2019 highs as US tightens sanctions on Iran

A general view of Iran's oil refinery quay in Lavan island. (AFP / Behrouz Mehri/File photo)
Updated 23 April 2019

Oil prices shoot to 2019 highs as US tightens sanctions on Iran

  • Iran’s main oil buyers initially received sanction exemptions
  • US reiterates its goal to cut Iran oil exports to zero

LONDON: World oil prices struck fresh 2019 peaks on Tuesday, boosting energy shares prices.

Crude futures extended Monday’s sharp rally, which was triggered by a US crackdown on Iranian oil exports.

Brent North Sea crude reached $74.70 per barrel Tuesday, the highest point since early November.

WTI hit a similar near six-month high at $66.19 per barrel.

“UK markets have returned from their long break with solid gains for the FTSE 100, led by strength in oil stocks thanks to the surge in crude prices over the past 24 hours,” noted Chris Beauchamp, chief market analyst at IG trading group.

Brent had rallied more than two dollars per barrel on Monday and WTI jumped $1.70.

The White House on Monday announced it was calling an end to six-month waivers that had exempted countries from unilateral US sanctions on Iranian oil exports.

Starting in May, these countries — China, India, Turkey, Japan, South Korea, Taiwan, Italy and Greece — would face sanctions if they continue to buy oil from Iran.

“This points to a big drop in the supply side, which boosts the commodity’s price,” said Margaret Yang Yan, market analyst at CMC Markets Singapore.

“Iran’s daily oil output amounts to 1.3 million barrels, according to latest figures in end March.”

But she added that “the sustainability of oil’s rally depends on Saudi and other OPEC members’ actions to increase oil supply in the month to come.”

Stephen Innes, head of trading and market strategy at SPI Asset Management, said rising crude prices meant $80 per barrel was now a “possibility.”

“Oil quickly repriced higher on fears that markets could face an immediate supply crunch, adding more pressure to the already tenuous global supply squeeze,” he added.

Energy and oil-linked shares jumped on Tuesday, with Tokyo-listed crude developer Inpex rallying 2.8 percent and oil refiner JXTG up 1.1 percent.

In London, BP shot up 2.4 percent and Shell jumped 2.3 percent — also as European stock markets reopened following the long Easter holiday weekend and before a deluge of corporate results this week.

“Some of the world’s biggest technology companies are reporting earnings this week as well as a raft of the big European banks,” Nick Twidale, chief operating officer at Rakuten Securities Australia, said in a note to clients.

“Investors will be hoping for some better-than-expected results from both groups to keep the topside momentum in global equities.”


STC postpones its acquisition of Vodafone Egypt for second time

Updated 44 min 38 sec ago

STC postpones its acquisition of Vodafone Egypt for second time

  • Kingdom’s largest telecom company says it will need an additional two months to complete the deal

CAIRO: The Saudi Telecom Company (STC), the Kingdom’s largest telecom company, said that it will need an additional two months to complete a deal to purchase a 55 percent stake in Vodafone Egypt.

In January, STC was in agreement to buy the stake for $2.4 billion. In April, it extended the process for 90 days due to logistical challenges stemming from the spread of COVD-19. The company said in a statement that it would extend the period again to September for the same reason.

The Public Investment Fund, the Saudi sovereign wealth fund, owns a majority stake in STC. The ownership of Vodafone Egypt is divided between 55 percent for Vodafone International, which is the target percentage of the Saudi purchase offer, 44.8 percent for Telecom Egypt, and the remaining 0.2 percent for small shareholders.

Telecom Egypt is awaiting the results of Vodafone’s evaluation of the final share price to announce its position on the deal. A Telecom Egypt official stated that the company is still awaiting STC’s position regarding the purchase of the share. If the deal is not completed, it may be presented with its rights to acquire Vodafone’s share, which would allow it to take over 99.8 percent of the company’s shares, leaving 0.2 percent for small investors.

Ashraf El-Wardany, an Egyptian communications expert, pointed out the importance of waiting until the procedures between STC and the Vodafone Group are complete. The results will determine the next steps by Telecom Egypt.

El-Wardany said that the Saudi operator must, after completing the relevant studies, submit a final binding offer at the share price and any conditions for purchase. If approved by Vodafone, it must submit the offer with the same conditions and price to Telecom Egypt, provided that the latter responds within a maximum period of 45 days to determine its position regarding the use of the right of pre-emption and the purchase, or lack thereof, of Vodafone’s share.

According to El-Wardany, there are other possible scenarios. Vodafone International may not be convinced of the offer or the conditions presented by the Saudi side and the sale may be withdrawn, or the Vodafone group may be ready to sell and has prepared another buyer for its stake in Egypt in the event of rejecting the Saudi offer. It may also it back away from the deal and continue to operate in Egypt for a few more years.

El-Wardany said that if Telecom Egypt decides not to use the right of pre-emption to acquire the remaining Vodafone shares for any reason, it will continue with its 44.8 percent stake.
It may also resort to selling all of its shares or part of it to the Saudi side or to any company that wants to acquire its stake.

“This raises the question of whether STC can acquire all of Vodafone’s shares,” El-Wardany said, adding that the coming months “will make the answer clear.”