The Perfect Moment to Take Out Iran
Donald L. Luskin
Michael Warren
Tuesday, April 23, 2019
A "Saudi call" and a million more barrels/day from the Permian mean little upside risk for oil.
Trump announced the end to waivers from US sanctions granted six months ago to eight nations that are large importers of Iran’s oil. Four have already ceased oil purchases from Iran, with China being the largest remaining importer. Assuming perfect compliance, 1.3 million barrels per day would be removed from global supply, but at historical levels of compliance, only 210,000. Trump has recently been supportive of Saudi initiatives in the Middle East, and the Kingdom has announced it will make up for any Iran shortfalls. Conflict in Libya and new US sanctions on Venezuela are upside headline risk for oil. But the “Saudi call,” stagnant global demand, and US production likely to increase by 1 million bbl/day by year-end, we see no sustained upside risk to oil. If anything, we face a potential glut.  
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Michael Warren and Donald Luskin