US President Donald Trump announced on Tuesday that he would reinstitute a maximum pressure campaign on Iran and force its oil exports to zero.
This comes as countries in the Opec alliance continue cuts in production.
Among the orders outlined in the memo on Iran issued by Mr Trump, the Treasury and State departments were directed to start a campaign “driving Iran's oil exports to zero”, Reuters reported. The memo did not describe how the US would do this.
US oil prices pared losses on Tuesday, recouping some due to the tariff friction between Washington and China earlier in the day. US West Texas Intermediate closed 0.63 per cent – or 46 cents – lower at $72.70 per barrel on Tuesday, while Brent crude futures rose 0.32 per cent – or 24 cents – to close the day at $76.20.
“The oil market has not moved substantially since this was announced, which indicates that it was already expected and priced in,” said Justin Alexander of Khalij Economics.
The announcement comes after Opec rebuffed Mr Trump's demands to lower oil prices by increasing output. The alliance announced late last year that its voluntary oil production cuts of 2.2 million barrels per day would continue until March this year.
Once that passes, the supply curbs will be phased out each month until the end of September 2026.
“So, it's a very slow, gradual process still leaves production significantly constrained, particularly for the Gulf states that are participating in the voluntary cuts,” Mr Alexander said.
While Iran is still a long way from near-zero oil exports, experts say that Opec has enough space to absorb the about 500,000 barrels per day that would be taken off the market because of sanctions enforcement.
Rachel Ziemba, a geoeconomic and country risk expert, said real losses could allow Opec to do the easing or speed up the unwinding of the cuts. With the Trump administration still a way from bringing Iran's oil exports down to zero, Opec can afford to carry on with its plans.
Mr Trump's moves follow action by former president Joe Biden during his final weeks in office, in which he placed new energy restrictions on Russia.
“So, I do think one of the other factors is, how tough does the US move towards more extensive maximum pressure at the same time that they're trying to tighten up, put more pressure on Russia?” Ms Ziemba said.
