U.S. crude fell below $81 a barrel on Tuesday, its lowest level since March, as the market shrugged off the threat of further sanctions on Iranian oil, CNBC reported.
West Texas Intermediate traded below its 50-day moving average of $81.22 a barrel for the first time since February. U.S. oil prices fell more than $6 from this year’s peak of $87.62 as traders bid higher on fears of a war between Iran and Israel.
Those concerns have largely allayed as Iran and Israel have signaled they are not interested in a wider war after exchanging retaliatory strikes earlier this month.
Over the weekend, the US House of Representatives passed legislation that expands sanctions against Iranian oil exports to include foreign ports, ships and refineries that knowingly process crude from the Islamic Republic. The Senate could vote on the bill as early as this week.
Under the terms of the bill, President Biden would implement the sanctions within 180 days of the law’s enactment, but has the power to lift the sanctions if he determines it is in the interest of US national security.
“This bill significantly increases sanctions against Iran, increases enforcement mechanisms,” said Helima Croft, commodities strategist at RBC Capital Markets.
The White House will face a “difficult choice” this summer – whether to impose the sanctions or issue waivers amid fears of a shrinking oil market, Croft said.
The Biden administration is deeply concerned about high oil prices ahead of the election, said Amrita Sen, founder and director of research at Energy Aspects. “This is an election year in the U.S. and the U.S. is going to do absolutely everything in its power to make sure that prices don’t go up,” Amrita Sen told CNBC.
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