Published: Mon, May 14, 2018
Finance | By Jaime Brady

Donald Trump exit from nuke deal won't affect oil industry, says Iran

Donald Trump exit from nuke deal won't affect oil industry, says Iran

Oil prices have risen after President Trump pulled the United States out of the worldwide nuclear deal with Iran and reignited tensions in the Middle East. Brent crude rose to $77.56 a barrel last night, its highest level since November 2014, on expectations of disruption to oil supplies from Iran, before easing back as investors booked profits.

Crude prices fell in a see-saw session on Friday, retreating after early gains as it looked likely that US allies would push to maintain a deal with Iran, which could keep that country's crude exports on global markets.

Our government may have the authority to tell American companies that they can't do business with Iran, but telling European companies whose governments signed an agreement lifting those sanctions that they also can't do business in this country? Russia, China, Turkey and India will likely all oppose the sanctions and keep their current levels of Iranian crude purchases.

Iran has doubled its oil exports since the landmark deal with Western powers to lift sanctions on its oil industry was implemented in January 2016.

OPEC, however, is in no hurry to decide whether to pump more oil to make up for an expected drop in exports from Iran, four sources familiar with the issue said, saying any loss in supply would take time. But Chinese refiners said there were alternative suppliers, especially in Russia, Saudi Arabia and West Africa.

Former US ambassador to the EU Anthony Gardner tweeted that Trump's Iran pull-out "made the world a far more risky place" and scathingly remarked: "So much for European efforts at flattery". Iran is fifth in the world in terms of oil output, and new sanctions could reduce global oil production significantly, possibly as much as 600,000 barrels per day by 2019, Daco wrote.

Meantime, it seems that the oil market is already in a bit of a supply/demand deficit.

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Total estimated export volume on Aframaxes, Suezmaxes and VLCCs from Iranian ports in April rose 16% to 2.70 million b/d from 2.32 million b/d in March, according to data from S&P Global Platts trade flow software cFlow. US output is creeping closer to that of top producer Russian Federation, which pumps about 11 million bpd. Crude has topped $78 a barrel, the highest since 2014, following Trump's sanctions announcement.

Mohammad Javad Zarif's tour starts two days after unprecedented Israeli strikes in Syria which a monitor said killed at least 11 Iranian fighters, triggering fears of a broader conflict between the two arch-enemies. The Iran-aligned Yemeni rebels (have been fighting a Saudi-led Arab coalition in Yemen since 2015) have been targeting Saudi Aramco oil facilities and the Saudi capital Riyadh with missiles and have been trying to attack Saudi oil tankers in the sea.

He said the effects of the U.S. move were already being felt in rising oil costs and an increase in political uncertainty in the Middle East. CEO Dennis Muilenburg said last month that losing the Iranian sales wouldn't slow down production.

Analysts say oil prices are already high enough to cause a drag on the economy.

As part of the supply deal, OPEC pledged to cut 1.2 million bpd from supplies from its members.

Analysts had little hope that opposition to the USA action would prevent sanctions from going ahead.

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