Australian energy companies surge ahead of US’s Iran oil sanctions

“We will no longer grant any exemptions. We’re going to zero – going to zero across the board,” US Secretary of State Mike Pompeo said.

“We don’t lay out sanctions that we don’t have any intention of encouraging countries to co-operate with,” he said.

The US reimposed sanctions in November on exports of Iranian oil but granted eight main buyers, mostly in Asia, waivers to the sanctions that allowed them limited purchases for half-a-year.

China was importing about 360,000 barrels per day (bpd) from Iran under the sanctions waiver and India around 300,000.

Iran currently produces about 1.3 million bpd of oil, down from 2.5 million bpd prior to the latest round of sanctions.

The oil price has recovered from a low of $US50 the day before Christmas to about $US74, helped by a combination of the Organisation of Petroleum Exporting Countries (OPEC) oil cartel and Russia committing to reducing global production levels last month as well as a decline in US oil stockpiles.

Credit Suisse analyst Saul Kavonic said ASX-listed oil and gas companies would ride the wave of rising prices as “all the Australian energy names are leveraged against the oil price”.

“What we’re seeing through 2019 is continuing strength in oil prices, so the earnings impact for Australian energy companies has been positive…but it has been somewhat offset by soft LNG prices,” Mr Kavonic said.

He said the impact would mostly be on the major energy companies’ earnings and that Australian producers would likely not be used to replace Iran’s output.


Mr Kavonic said all eyes would be on how OPEC and Russia respond.

“Indications are that OPEC and Russia will increase output to offset Iran’s lost output,” he said.

CommSec economist Ryan Felsman said OPEC would remain the barometer for future oil movements.

“There could be some respite from rising oil prices in the second half of this year, [as] Saudi Arabia is expected to increase supply to offset the loss of Iranian crude exports,” Mr Felsman said.

“Russia has already signalled that it may not support continued supply cuts when OPEC meets in June.”

An Australian energy analyst, who preferred to remain anonymous, said the despite the current rise in prices, not all oil and gas companies would see the same boost.

“Beach Energy and Santos, and to a lesser extent Oil Search, will see more of a boost as they have greater leverage to the oil price compared to Woodside,” he said.

Santos, Oil Search and Beach Energy declined to comment.

Woodside was approached for comment.

Energy stocks were the best performers on the ASX on Tuesday.

By the close of Tuesday trading, Santos rose 3.1 per cent to $7.44, Beach lifted 3.3 per cent to $2.21, Oil Search increased 1.9 per cent to $8.22 and Woodside jumped 2.6 per cent to $36.59.

Covering energy and policy at Fairfax Media.

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