The US government surprised the oil markets by ending waivers on sanctions against Iran, pushing prices to new 2019 highs and exacerbating a global supply crisis for sour crude oil. Pump prices for petrol were more than 4ppl higher than a year ago and climbing steadily.

Benchmark Brent crude futures briefly hit $74.50/bl, before falling back to $72/bl, but were still up nearly 50% on the year.

Washington’s abrupt decision to end its Iran sanction waivers just six months after surprising the market by issuing the waivers in the first place, left the markets bewildered and jumpy.

President Trump’s tweeted assurances that Saudi Arabia and UAE have privately agreed to plug the supply gap were typically short of detail and not corroborated by the states themselves.

The threat to Iranian supply is still unlikely to lead to zero exports from the Republic, but could not come at a worse time for refiners who typically process sour crude. Cuts in Venezuelan output because of internal chaos and US sanctions persist. And to cap it all, Baltic-loading exports of Urals crude from Russia were suspended because of contamination in a crucial pipeline, cutting off a primary source for sour crude oil to central and eastern Europe.

The hikes in crude have pushed up transport fuel prices significantly enough at the forecourt to attract the attention of the UK mainstream media and could yet prove inflationary. Petrol is continuing to rise faster than diesel and this trend is expected to continue as US demand kicks in for the summer and attracts gasoline cargoes from Europe. Oil traders also report strong gasoline buying in west Africa from Europe, further tightening supplies.

Whether by design or neglect, Washington has effectively outsourced the oil market fallout from its sanctions policies to Opec. Saudi Arabia and its Opec colleagues are likely to use this lever to manage holding prices close to $75/bl, far higher than the US would have wanted heading into the summer driving season. Unpredictable foreign policies will often have unintended consequences