Return of Iran sanctions fires up oil prices

Return of Iran sanctions fires up oil prices

In another sign global supplies could rise further, data in the afternoon showed US crude producers added 10 rigs in the latest week.

The EU will not be almost as cooperative with Trump as it was with the Obama administration.

Under the new sanctions, the United States will begin blocking new deals with Iran immediately, but will provide leniency toward firms with existing commercial agreements if they demonstrate that they are reducing their involvement with Iran over a 180-day "wind-down" period. Weekly US crude oil production C-OUT-T-EIA; hit another record last week, climbing to 10.7 million barrels per day (bpd).

Oil markets have been surging in recent days because of President Trump's plans to reimpose sanctions on the country, which produces 3.9 million barrels a day, or about 4 per cent of the world's supplies.

Major European companies, partly fearing harsh penalties because of the remaining US sanctions on Iran, have been reluctant to do business with Tehran, which needs to attract over $100 billion in foreign investment to boost its crude output.

Analysts worry that by exiting the Iran nuclear deal, Trump has paved the way for even more tension in an already unstable region.

"The Omani, Qatari, and Kuwaiti governments have all sought to maintain pragmatic relations - economic more than political - with Iran", said Kristian Coates Ulrichsen, Fellow for the Middle East at Rice University's Baker Institute. The U.S. has advised other countries to "significantly reduce" their purchases of oil from Iran. Japan and South Korea might comply with the reimposition to keep good ties with the US, but might also seek exemptions to minimize damage. As a result, Japanese President Shinzo Abe is laser-focused on remaining in Washington's good graces.

But Iran re-emerged as a major oil exporter in January 2016 when worldwide sanctions were suspended in return for curbs on Iran's nuclear programme.

More news: Real Madrid's Zidane elaborates on Ronaldo ankle injury

And apart from Dubai and Oman, the wealthy Gulf oil exporting states have minimal trade and investment links with Iran, meaning they have little to lose. The EU has vowed to protect its companies, and could even pursue trade retaliation if the U.S. Treasury moves to penalize European companies.

This source had also said the impact of USA sanctions on Iranian supplies needed to be assessed first and Saudi Arabia did not expect any physical impact on the market until the third or fourth quarters. "But in the long run, it might discourage European Union companies from investing in the Iranian oil industry and hamper the country's production ability in the future", he tells Barron's. Since the 2015 agreement, however, Indian refiners have been settling oil dues with Iran in euros. Oil is likely to target $71.75 now.

Trump "coming forward and not renewing the deal, and adding sanctions back, obviously is very constructive for crude oil prices", said Nick Holmes, an analyst at Tortoise in Leawood, Kansas, which manages $16 billion in energy-related assets. But so far, Iran's response has been quite restrained.

Meanwhile, Saudi Arabia - which has long called for sanctions to be re-imposed on Iran - has pledged to "mitigate" the effects of the sanctions. Riyadh lost no time in assuring the market on Tuesday that it would compensate for any fall in Iranian supply.

While investors are still evaluating the full impact of the United States withdrawal from the nuclear accord, UBS Group AG said the sanctions could cut Iran's oil exports by as much as 500,000 barrels a day in the next six months. After all, it's a global commodity in a global market.

Saudi Arabia's Crown Prince Mohammed bin Salman at La Moncloa palace in Madrid on April 12. Energy bureau officials controlled that problem through close coordination with other USA agencies, embassies overseas and local law enforcement, the former State Department officials said.

Unlike 2012, the United States is entering these sanctions alone, and this means that it has less control over their efficacy. I think that given the withdrawal from the accord and assuming that Iran doesn't change its mind, the price of crude might move to the $85 level by the end of the summer.

Related Articles

  • Indian PM visits Nepal as relations recover but China competition remains

    Indian PM visits Nepal as relations recover but China competition remains

    Prime Minister Modi is also scheduled to meet with President of Nepal Bidhya Devi Bhandari and Vice President Nanda Bahadur Pun. During his visit, Prime Minister Modi and his Nepali counterpart will jointly inaugurate the hydro-electric project Arun III.
    Top lawyer steps down over abuse allegations

    Top lawyer steps down over abuse allegations

    Few were more surprised to see the developments than Dennis Vacco, who served as the state Attorney General from 1994 to 1999. Among the names being bandied about as a possible successor are state Sen. "I think violence is relatively rare", he said.
    Delhi, NCR witness dust storm, rains likely

    Delhi, NCR witness dust storm, rains likely

    The advisory said that commuters should "keep themselves updated about weather conditions and plan their journey accordingly". The Delhi Traffic Police's has advised people not to panic and avoid travelling when the storm hits the place.
  • Philadelphia 76ers: 3 final thoughts on playoff series loss to Celtics

    Philadelphia 76ers: 3 final thoughts on playoff series loss to Celtics

    They will be picking 26th, 38th, 39th, 56th and 60th - and will likely have a lottery pick, as well. Smart will most likely be matched up against LeBron James on defense.
    Don Jr. moving on from Vanessa with Fox host Kimberly Guilfoyle

    Don Jr. moving on from Vanessa with Fox host Kimberly Guilfoyle

    Weirdly, she was also briefly linked to Anthony Scaramucci past year when he separated from his wife, Deidre Ball. In addition to The Five , Guilfoyle regularly appears on other FNC shows as a legal analyst.
    USA  to separate families crossing border illegally

    USA to separate families crossing border illegally

    He cited a doubling of detentions for illegal entry along that border in April 2018, compared to the same month previous year . The new approach will separate thousands of children from their parents when they are arrested, which critics called inhumane.
  • The Bank of England Turns Dovish, GBP/USD Turns Bearish

    The Bank of England Turns Dovish, GBP/USD Turns Bearish

    Practically, this largely involves the Bank adjusting interest rates to try and keep inflation at, or as close to, a target of 2%. Carney defended himself against that charge, arguing that when the situation changes, the bank's policy response has to change.
    Woman accused of stalking Arizona man, took bath in home

    Woman accused of stalking Arizona man, took bath in home

    Jacqueline Ades of Phoenix was arrested Tuesday and slapped with charges of threatening and intimating, stalking and harassment. Officers found Ades still outside the victim's home when they arrived and told her to leave, officials said.
    Oops: Gwyneth Paltrow just let slip a massive spoilers for Avengers 4

    Oops: Gwyneth Paltrow just let slip a massive spoilers for Avengers 4

    More recently, Gwyneth Paltrow , who plays Tony Stark's fiance Pepper Potts , revealed some spoilers for the next Avengers movie. The Illuminati were formed following the events of the Kree-Skrull War in order to face similar cosmic threats.
  • Senate Will Vote to Reinstate Net Neutrality Protections

    Senate Will Vote to Reinstate Net Neutrality Protections

    A petition related to net neutrality with 32 signatures was delivered on Wednesday, thereby forcing a vote on the Senate floor. If the measure is passed by a simple majority vote, it would still need to be signed by President Donald Trump .
    Miranda Kerr is a Mom for the Second Time!

    Miranda Kerr is a Mom for the Second Time!

    Last December, Kerr revealed that she was experiencing more complications with her second pregnancy than with her first. Miranda's doctors delivered him at Cedars-Sinai Medical Center in L.A. around 11:50 PM.
    Rise in gas prices hits the breaks

    Rise in gas prices hits the breaks

    Despite increasing throughout April, gas prices in Florida are holding steady and are under the national average. Florida's average fell one cent to $2.73 on Sunday, but that's up 35 cents compared to this time previous year .