Iran Deal Decision Affecting Oil Prices

Iran Deal Decision Affecting Oil Prices

Oil prices steadied on Friday, consolidating after recent gains, as global supplies stayed tight and the market awaited news from Washington over possible new U.S. sanctions against Iran.

The May 12 deadline for announcements on potential new USA sanctions on Iran bolstered the market, said Bob Yawger, director at Mizuho.

"Overall, we continue to trade a waiting game for the USA decision on Iran, waiting to have sanction headlines trigger some frenzied buying", said Olivier Jakob, managing director of energy consultancy PetroMatrix. In addition, last week crude oil reserves in the country increased by 6.2 million barrels.

Strong member compliance for the Organization of the Petroleum Exporting Countries' (OPEC) crude production cuts, which has been championed most vocally by Saudi Arabia, is said to have supported another day of gains in the crude market: West Texas Intermediate on Thursday settled up 50 cents to $68.43 per barrel, while Brent rose 52 cents to $73.88 per barrel. The benchmark contract hit a 3-1/2 year closing high of $75.17 on Monday. US West Texas Intermediate crude futures dropped 1.06% to $67.84 a barrel.

If Trump pulls out of the deal, as many are expecting that he will, this will mean increased U.S. sanctions against the Iranian Regime, possibly stopping Iranian oil from being sold to the US.

The Iranian Foreign Minister said on Thursday that the United States demands for a change in the nuclear deal are unacceptable.

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European powers still want to hand Trump a plan to save the Iran nuclear deal next week, but they have also started work on protecting EU-Iranian business ties if the US president makes good on a threat to withdraw, six sources told Reuters. But they have also started work on protecting EU-Iranian business ties if the U.S. president makes good on a threat to withdraw.

Aside from security concerns, growing United States crude supplies are capping price gains.

Following the lifting of global sanctions against Iran in January 2016, the country was able to become a major oil exporter, often undercutting Saudi Arabia despite an agreement not to.

Surging production in the Permian basin has continued to outpace pipeline capacity, while local refining issues have exacerbated oversupply in the region, dealers told Reuters. Because most oil market forecasts assumed OPEC would adhere closely to the production targets, and not under produce, most analysts predicted at the start of 2018 that the oil market would see inventory builds again in the second quarter.

Ahead, the American Petroleum Institute reports its estimates of weekly USA crude oil stocks at 4:30 p.m. on Tuesday.

ANZ analysts Daniel Hynes and Soni Kumari said Brent could reach $80 a barrel by the end of this year, attributing recent strength to rising geopolitical risks and tighter global supply. "We expect the market to tighten even further in H2 2018".

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