On Wednesday, oil prices rose more than 2 percent with Brent hitting a 3-1/2-year high, after U.S. President Trump abandoned a nuclear deal with Iran and announced the “highest level” of sanctions against the OPEC member amid an already tight market.
Ignoring pleas by allies, on Tuesday, U.S. President Donald Trump pulled out of an international nuclear deal with Iran that was agreed in late 2015, raising the risk of conflict in the Middle East and casting uncertainty over global oil supplies.
Brent crude oil futures at one point touched their highest since November 2014 at $76.75 per barrel. At 0653 GMT, they were still at $76.62 per barrel, up $1.77, or 2.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were up $1.51 per barrel, or 2.2 percent, at $70.57 a barrel, near highs also last seen in late 2014.
In China, the biggest single buyer of Iranian oil, Shanghai crude futures hit their strongest in dollar terms since they were launched in late May, around $73.20 per barrel.
Analysts said the soaring prices were the result of an expected fall in Iranian oil exports.
Sukrit Vijayakar, director of energy consultancy Trifecta said that Iran’s exports of oil to Asia and Europe will almost certainly decline later this year and into 2019 as some nations seek alternatives in order to avoid trouble with Washington and as sanctions start to bite.
Iran re-emerged as a major oil exporter in 2016 after international sanctions against it were lifted in return for curbs on its nuclear program, with its April exports standing above 2.6 million barrels per day (bpd).
That made Iran the third biggest exporter, behind Saudi Arabia and Iraq, of crude within the Organization of the Petroleum Exporting Countries (OPEC).
Walking away from the deal means that the United States will likely re-impose sanctions against Iran after 180 days, unless some other agreement is reached before then.
“Trump’s decision puts into place a scenario that could see the crude oil market tighten significantly in H2 2018 and into next year”, said ANZ bank. /Reuters.com