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Oil touches 3½-year high after USA quits Iran deal

Oil touches 3½-year high after USA quits Iran deal

President Donald Trump chose a dicey time to crack down on Iran, the world's fifth-biggest oil producer.

Iran increased its oil production by 1 million barrels per day after sanctions were lifted back in 2016.

Volumes jumped for all key crude oil futures contracts as investors took new positions and refiners hedged to protect themselves from higher feedstock prices.

This week's rally in crude oil prices may be a knee-jerk reaction to the USA move out of the Iranian deal.

Iranian oil exports are expected to decline over time, while prospects for foreign investment in its energy sector will be diminished, in turn placing pressure on the Middle Eastern country's oil-dependent economy, Kiernan said.

Global oil prices skyrocketed on Wednesday after Donald Trump announced the withdrawal of the U.S. from the Iran nuclear deal.

Shortly after the exchange launched, Reuters reported on March 29 that Chinese regulators had informally asked a handful of financial institutions to prepare for pricing China's crude imports in the yuan, according to three sources at some of the financial firms. "Oil prices will certainly move up, and $90-100 per barrel prices may again be on the cards", Fesharaki said.

Zanganeh said foreign investment was needed to develop Iran's its oil industry, but that it could survive even if foreigners made a decision to stay away for fear of USA penalties.

One factor that could prevent markets from tightening further is soaring U.S. oil output.

More news: Google I/O 2018 Complete Wrap Up: Everything You Need To Know

The language of the sanctions legislation outlines a 180-day window, meaning it's too soon for Iranian oil flows to be limited in real terms.

"We expect that around October Iranian exports will be down by 500,000 barrels per day (bpd) and eventually fall by 1 million bpd", the bank said.

One factor that could partially mitigate any shortfall from Iran is soaring USA oil output.

"China is the largest commodity producer in the world and the largest commodity consumer in the world, so it would make sense that Chinese futures that are close to the areas of supply and demand would be a more natural benchmark than the USA markets", said Marwan Younes, founder and chief investment officer of Massar Capital Management in NY. Saudi Arabia signaled it could make up lost supplies, and Goldman Sachs Group Inc. said there's a chance prices may exceed its forecast.

The threat of new sanctions come amid an oil market that has already been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and top producer Russian Federation have led efforts since 2017 to withhold oil supplies to prop up prices.

One factor that could partially mitigate any shortfall from Iran is soaring U.S. oil output.

Italy's Eni also continues to buy Iranian oil and it is buying 2 million barrels of oil per month from Iran under a deal that expires at the end of the year. Any short-term spike in the oil price in response to the curtailment of Iranian imports is likely to provide higher revenues to actors like Russian Federation.

Saudi Arabia said it would work with other producers to lessen the impact of any shortage in oil supplies.


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