Oil Jumps as Supplies Shrink, Trump Seeks Curbs on Iranian Crude

Galtero Lara
May 16, 2018

Traders assessing the impact of the US withdrawing from the Iran deal, combined with issues in Venezuela and a strong USA inventory report has led prices to rise, said Craig Bethune, a senior portfolio manager at Manulife Asset Management.

Still, Iran will feel the pain from USA sanctions, even without cooperation from the other global partners.

The Treasury imposed the sanctions on nine Iranians and companies it said were operating a corrupt currency exchange network in the United Arab Emirates with complicity from Iran's Central Bank.

Depending on the applicable sanctions, non-U.S. persons now have 90 days (until August 6, 2018) or 180 days (until November 4, 2018) to wind down activities with or involving Iran that were consistent with the USA sanctions relief provided under the JCPOA before facing exposure to potential sanctions imposed by the United States. In a press briefing on Tuesday, former U.S. Ambassador to Israel Daniel Shapiro told reporters he believed Trump's decision was "a major mistake" and a "reckless and ill-advised decision".

France has slammed an "unacceptable" the U.S. move to re-impose sanctions on companies trading with Iran following President Donald Trump's decision to dump the landmark 2015 deal that sought to curb Tehran's nuclear programme.

"Let me say that the recent withdrawal of President Donald Trump from the Iran nuclear deal is a very sad one".

Tehran agreed in 2015 to curb its uranium enrichment programme in exchange for sanctions relief after mammoth negotiations with the US, France, Germany, the United Kingdom, China and Russian Federation. In response to Trump's rant, Leader of the Islamic Revolution Ayatollah Khamenei stressed that Washington's problem with Iran has in fact nothing to do with the country's nuclear program.

Jubeir said: 'These missiles are Iranian manufactured and delivered to the Huthis.

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This all comes at a time when the global oil supply is slimming down. Iran does not seem to like the OPEC deal anyway, so this is exactly what we expect Iran to do.

Most EU imports from Iran are energy-related - more than 75% is oil and other fuels.

Previously, India maintained its right to trade with Tehran despite United States and European Union sanctions on Iran. The rally is being driven by looming US sanctions against major oil producer and OPEC-member Iran which threaten to drive prices even higher over the near-term as traders prepare for an even tighter supply situation.

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

Brent crude futures, the worldwide benchmark for oil prices, hit their strongest since November 2014 at $77.76 per barrel on Thursday.

As well as the nuclear deal fallout, tensions between the countries have been rising over Iran's support for the Huthi rebels in Yemen, who have been firing rockets across the border. The country, the third-biggest producer of crude within OPEC, exported about 2.6 million barrels per day (bpd) in April.

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

However, Saudi Arabia - the de-facto head of OPEC - signaled this week it could up its own production to make up for lost barrels from Iran.

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