Oil prices jump after U.S. abandons Iran deal, plans 'highest level' sanctions

12 May, 2018, 20:50 | Author: Barbara Daniel
  • Oil Prices Reach Highest Since November 2014 On Venezuela, Iran Worries

ANALYST'S TAKE: "Geopolitical risks are heightened especially if Iran retaliates, but it could wait and see if the deal is completely undone or if there is scope for it to continue without the U.S.", Mizuho Bank said in a daily commentary.

European and American companies could lose billions of dollars in commercial deals struck since the 2015 Iranian nuclear accord, and lose access to a major new export market.

"My expectation is not that oil prices go higher", he said.

Brent crude oil touched its highest since November 2014 on Wednesday, up $2.19 a barrel, or 2.9% at $77.04 US late in the morning session. Now that there are more issues that point towards a possible disruption of supply in crude oil, the commodity price added about one percent in NY futures.

UK Prime Minister Theresa May, French President Emmanuel Macron and German Chancellor Angela Merkel issued a joint statement in the wake of the United States president's announcement calling on all the other parties to the JCPOA to stay committed to their obligations under the agreement.

A number of countries have already cut reliance on Iranian oil, as well as other "traditional" sources of supply, due to surge in cheaper US crude exports.

Trump announced his intent on Tuesday to quit the Iran nuclear deal and reimpose sanctions on the country.

"We are trying to avoid at all costs direct military action with Iran, but Iran's behavior such as this can not continue". "I think they would as quickly as possible try to implement the sanctions".

The sanctions come amid an oil market that has 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.

Israel said its fighter jets then struck 70 military targets belonging to Iran inside Syria.

The Treasury Department said it took joint action with the United Arab Emirates against nine Iranian individuals and entities involved in the network, and threatened sanctions against any other companies that help those nine. Looming over markets is surging US output, which has soared by more than a quarter in the last two years, to 10.62 million barrels per day.

Jefferies said OPEC "has the capacity to replace the Iranian losses" but warned that "even if physical supply is held constant. the market will still be faced with a precariously low level of spare capacity".

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