Saudi Arabia Wants Nuclear Weapon If Iran Acquires One, Minister Says

10 May, 2018, 14:10 | Author: Barbara Daniel

Even without disruption to Iran's crude flows, the balance between supply and demand in the oil market has been tightening steadily, especially in Asia, and as top exporter Saudi Arabia and No.1 producer Russian Federation have led efforts since 2017 to withhold oil supplies to prop up prices. However, it traditionally neither confirms nor denies their existence.

"Now, with his announcement Tuesday that he is exiting the Iran deal and will reimpose economic sanctions on the country and firms around the world that do business with it, Mr. Trump is engaged in a grand, highly risky experiment". Treasury Secretary Steven Mnuchin on Tuesday said the administration has sought help from oil producing allies to keep prices in check.

USA gasoline prices are already averaging just under $3 per gallon, the highest level since late 2014, up from $2.50 a year ago. Yet, even in the case that Saudi Arabia keeps to its schedule, the USA nuclear industry could still play an important role.

Such an agreement is necessary for the United States to transfer significant nuclear material, equipment, or components from the United States to Saudi Arabia and could considerably help USA companies like Westinghouse be shortlisted later this year to build the country's first two nuclear reactors. Since the 2015 agreement, however, Indian refiners have been settling oil dues with Iran in euros.

The output agreement has already been extended twice, in May and December 2017, and is now scheduled to run until at least December 2018.

Major oil producers from OPEC and non-OPEC members including Russian Federation, the world's top producer, are linked to a deal until the end of the year to cut output by 1.8 million bpd to support prices.

But further significant price increases threaten to complicate OPEC's strategy by accelerating the upturn in shale drilling, as well as denting the growth in oil consumption.

While both India and China have scope to lower their imports from Iran, they will likely be reluctant, especially given the ongoing dispute over pricing between China's top refiner Sinopec and Saudi Arabia.

In theory, USA sanctions on Iran's oil industry will not be re-imposed for six months to give customers, traders and banks time to wind down their relationships in an orderly fashion.

It's not clear that pricey crude will slow down the economy, however.

The US Treasury Department has indicated that sanctions won't be reimposed immediately, and will take up to 180 days to allow Iranian oil customers and other companies involved in doing business with Tehran to make plans.

He added: 'Iran's oil and gas industry has been much more experienced in the last 4 years and it considers different mechanisms. That world no longer exists. "As we get close to $80, they have to consider that the market will be looking for their decision on next year", Sfakianakis said.

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

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