‘More volatility’ expected as Iran sanctions set to prompt wild swings in oil prices, Vopak CEO says

A shipping revolution and a U.S. plan to impose targeted crude sanctions against Iran is likely to prompt wild swings in the oil price over the coming months, Vopak’s chief executive told CNBC on Friday. Energy market participants are currently seen weighing bullish factors that include potential supply disruptions to Iranian crude exports against more bearish indicators, such as the darkening global economic outlook and a resurgent U.S. dollar.

International benchmark Brent crude traded at around $72.07 on Friday afternoon, up almost 1 percent, while U.S. West Texas Intermediate (WTI) stood at $65.77, up more than 0.5 percent. On January 1, 2020, the International Maritime Organization (IMO) will enforce new emissions standards designed to significantly curb pollution produced by the world’s ships. The rule changes — which one leading energy analyst recently described as the “biggest in the history of the market” — are seen as a source of great concern for some of the world’s largest oil producers. That’s because global energy and shipping industries are thought to be ill-prepared for the new measures.

Further to the IMO’s changes, external observers are particularly concerned about the supply disruptions caused by Washington’s plan to impose further sanctions against Iran in November. He warned crude futures are likely to be so volatile that a slump to $50 a barrel, or a spike above $100 could not be completely ruled out over the same time period. WTI crude hit a year-to-date peak above $74 in early July, a 25 percent increase from its February trough below $60. A move of that severity is not unheard of in commodity markets. From the middle to end of 2008, during the height of the financial crisis, crude oil tanked 77 percent. During the more recent slump from mid-2015 to early 2016, prices tumbled 56 percent.