Oil prices have swung wildly in the past month ahead of the US sanctions against Iran taking effect. But what are the key factors driving the price swings and what comes next?

1. From famine to feast? Just one month ago Brent crude hit a four-year high above $86 a barrel as traders worried that the forthcoming US sanctions on Iran would create a shortage of supplies. Since then, however, prices have fallen 15 per cent as the market has reassessed the situation. US oil output has risen faster than expected, while Saudi Arabia, the world’s largest exporter, has increased production close to its highest level on record. Russia and others have also started to pump largely at will, while the US has issued limited waivers to major buyers of Iranian oil to help keep prices in check. It seems the market has suddenly become a lot more relaxed about the availability of crude, and prices have weakened accordingly. But some traders are warning that it could be premature to argue that the oil market’s troubles are behind it.

2. Iran sanctions take effect Eight countries have been given allowances to import limited amounts of Iranian oil as US sanctions aimed at hurting Tehran’s economy take effect. China, India, South Korea, Japan and Turkey are among the beneficiaries. Iran’s exports may not now fall quickly to the US administration’s target of zero, but they are down significantly. Iran had ramped up exports to 2.8m barrels a day in April and they fell below 1.8m b/d last month. Even with the waivers, analysts at consultancy FGE forecast a further drop to 1.3m b/d in the next six months.