Thursday, 24 January, 2019

Iran says nuclear deal talks with European Union 'constructive'

Oil edges up at settlement as supply questions vex market Iran says nuclear deal talks with European Union 'constructive'
Nellie Chapman | 16 May, 2018, 23:08

At the time of writing, Brent crude futures peaked at 3.5-year highs on the back of Trump's decision, meaning that the oil bulls have good reason for optimism at least in the short-term.

Trump claimed that the deal had failed to prevent Iran from developing nuclear weapons or supporting terrorism in the region. The country is reportedly set to buy the most oil it has ever bought within any given period at more than nine billion barrels, almost 10 per cent of global demand. At least some of that oil will now be pulled from the market - at a time when oil prices are already rising because of production cuts by OPEC and Russian Federation as well as instability in Venezuela. In late April 2018, daily spot prices for Brent crude oil reached 76 dollars per barrel, the highest level in almost four years.

Russian Federation has also criticised Trump's decision, with Kremlin spokesperson Dmitry Peskov alleging the move was "protectionism in disguise", in comments made on Thursday to state news agency TASS. Crude topped $70 a barrel this week for the first time in almost four years.

EIA's May Short-Term Energy Outlook (STEO) forecasts that Brent crude oil prices will average $71 per barrel (b) in 2018, $7/b higher than last month's STEO.

United States sanctions on Iran will have a six-month period during which buyers should "wind down" oil purchases, meaning any loss of supply will not be immediately felt in the market. Even though WTI is a domestic crude benchmark and Brent is an global benchmark, gasoline prices in the United States tend to follow Brent. The typical family will spend about $200 more this summer driving season, according to the Oil Price Information Service.

As a private citizen, Bolton suggested in the past that the United States push for a change in Iran's government.

The Republican also accused the worldwide agreement of encouraging "malign activity" in the Middle East. But the reach of the U.S. financial system, the dominance of the dollar and the presence of European companies' operations in the United States all weaken any potential EU measures.

"The three or four-year period of quiet in terms of geopolitics impacting oil markets is over", said Canary's Eberhart. "Who will buy Iranian oil and who will side with Trump".

During the 2016 U.S. presidential election campaign, then-candidate Trump called the JCPOA "the worst deal ever", while his predecessor Barack Obama had considered it a major achievement.

In April, when EIA developed the May STEO, several geopolitical risks presented sources of uncertainty.

Trump also said he would reinstate U.S. nuclear sanctions on Iran and impose "the highest level" of economic bans on the Islamic Republic.

As those sanctions kick in, it will have an even broader effect as well, Bolton said. "Iranian is not the only crude", the manager told Reuters. The figure was also lower than that of January this year, which stood at 1.61 million barrels per day.

That's still a sizable amount of oil, especially considering the strong demand around the world.

Pompeo said he was "hopeful in the days and weeks ahead we can come up with a deal that really works, that really protects the world from Iranian bad behaviour, not just their nuclear program, but their missiles and their malign behaviour as well".

One catch: Output is surging so much in the Permian Basin, America's biggest oilfield, that pipelines can't keep up.