Return of Iran sanctions fires up oil prices


President Donald Trump is preparing to impose new sanctions on Iran, the White House said on Wednesday, following the US withdrawal from the multinational 2015 agreement that stalled Iran's nuclear programme.

People are guessing right now at the moment the oil production in Iran is 3,8 million barrels a day, that was the output in March; and the export is between 2 and 2,5 million barrels a day.

The price for Brent crude oil was down 0.1 percent to $77.13 per barrel as of 9:15 a.m. EDT.

Of course, for all importing countries it would be negative for those countries, but it's not only the situation in Iran, but also the situation in Venezuela, where the oil production is also reduced quite significantly, so there is a big lack of oil supply at the moment, so that's the reason why I don't think it's going to disappear just overnight or in the very sure short-term, so I think we're going to see higher oil prices down the road.

South Korea's Ministry of Trade, Industry and Energy said it planned "to minimize the damage" to its companies, adding it would seek an exemption from sanctions.

Investors are anxious that renewed sanctions on Iran, a major oil producer, could lead to supply disruptions.

European buyers are not in an immediate rush to replace Iranian supplies due to that wind-down period, with sanctions expected to kick in in November. Analysis from commodity pricing group S&P Global Platts found there may be some "wiggle room" given the nature of the USA decision.

One factor that could prevent markets from tightening further is soaring United States oil output.

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That's about 1 million barrels a day more than in early 2016.

"It's quite possible that surging U.S. shale production could easily fill the gap left by Iran", Eberhart said.

"Although Iran produced only 5% of the annual oil output in 2017, a conflict in the Middle East could disrupt supply from Saudi Arabia, the UAE, Kuwait, Iraq and Qatar, which together made up 26% of world supply", Nomura said.

One factor that could partially mitigate any shortfall from Iran is soaring United States oil output. The deal, which called for the curbing of Iran's nuclear programme, paved the way for the lifting of global sanctions against the country. US heating oil futures surged to $2.2258 a gallon, the highest since February 2015.

Saudi Arabia is monitoring the impact of the US withdrawal from the Iran nuclear deal on oil supplies and is ready to offset any shortage but it will not act alone to fill the gap, an OPEC source familiar with the kingdom's oil thinking said on Wednesday.

India, the second largest importer of Iranian oil, is unlikely to be immediately affected by US sanctions.

That provides the kingdom with convenient geopolitical cover to gain back some of the market share it sacrificed as part of its leadership of an agreement among OPEC and other producers to reduce global oil supplies.

In reaction to a Tweet last month by Trump that accused OPEC of "artificially" boosting oil prices, Zanganeh said "Trump is not honest about oil prices ..."