US Oil Prices Crosses $70 Amid Iran, Venezuela Crisis

14 May, 2018, 00:48 | Author: Lora Ball
  • Trump Set a Deadline for the Nuclear Deal With Iran. Now Oil Prices Are the Highest in Almost 4 Years

The French oil firm Total is in a similar boat, having agreed to help Iran develop the world's largest gas field, South Pars. Looking forward, the summer months are likely to witness heightened UK Brent price volatility as there are still many unresolved questions about exactly how the USA decision will impact other key actors. In an interview in mid-March, Saudi Crown Prince Mohammed bin Salman warned: "Without a doubt, if Iran developed a nuclear bomb, we will follow suit as soon as possible".

Ship insurance was a critical hurdle when sanctions were previously imposed on Iran because tanker operators couldn't obtain the level of cover that's considered standard across the oil industry.

In that case, the terms of the deal allow for reimposition of sanctions "but these provisions would not apply with retroactive effect to contracts signed between any party and Iran or Iranian individuals and entities" while the JCPOA was in effect.

Many analysts expect oil prices to rise significantly, as the market adjusts to looming United States sanctions and Iran's exports sink amid strong demand. There was no talk of future efforts to "improve" or "fix" the deal.

The following year, Deutsche Bank paid $258 million in U.S. fines for doing business with Iran and Syria pursuing, according to United States regulators, a "lucrative" USA dollar business for sanctioned customers. This is a very important point.

Several US military officials told CNN that there are increasing concerns Iran is on the cusp of an attack against Israel. In the case of Europe, there is talk of taking actions to insulate European businesses from the impact of U.S. sanctions.

"If the Europeans are willing to give us sufficient guarantees, it makes sense for us to stay in the deal", said the deputy speaker of Iran's parliament, Ali Motahari. For the companies involved, even those with minority state ownership, this is a business decision, and their governments' diplomatic stance will not be the deciding factor.

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But Chinese refiners said there were alternative suppliers, especially in Russia, Saudi Arabia and West Africa.

After a prolonged period of low prices and relative calm, oil watchers arepredicting a surge of volatility following President Trump's decision to reimpose sanctions on Iran.

China nearly certainly will not comply with this sort of diktat by the USA, though the Chinese government may not explicitly state this intention.

While Gulf petro-states stand to benefit from a rise in prices, the U.S. move could mean new fissures in the region. U.S. oil production is skyrocketing, though output in the oil-rich Permian Basin is being limited by pipeline shortages that could last until late 2019. In April, Zarif suggested during an interview with CBS' Face the Nation that Iran would be open to a prisoner swap if Trump showed Iran more respect and stopped making references to regime change. Earlier this year, during the visit from Iranian President Hassan Rouhani to the country, a joint statement recorded the support from India.

Provocations in regional hotspots like Syria and Yemen also will drive volatility, with the Israeli strike on Iran-linked targets in Syria yesterday and today's missile launches against the Saudi capital by Iran-aligned Houthi rebels in Yemen driving some of the recent price move.

They were still at 76.52 dollars per barrel at 0628 GMT, up 1.67 dollar or 2.2 per cent, from their last close. Saudi Crown Prince Mohammed bin Salman would clearly like to see prices higher for his own short-term ends including the upcoming Saudi Aramco IPO, but US Treasury Secretary Steven Mnuchin already has alluded to the need for this.

DaMina Advisors is an Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

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