United States leaving of JCPOA won't affect Iran's oil, gas exports, revenue: Zanganeh

Georgia Reed
May 12, 2018

Oil prices rose more than two per cent on Wednesday, climbing to near 3½ year highs, after U.S. President Trump abandoned a nuclear deal with Iran and announced the "highest level" of sanctions against the OPEC member.

The United States plans to reintroduce sanctions against Iran, which pumps about 4 percent of the world's oil, after abandoning a deal reached in late 2015 that limited Tehran's nuclear ambitions in exchange for the removal of US and European sanctions.

Brent crude futures were up 29 cents at $77.50 a barrel by 0933 GMT, having gained 3.5 percent so far this week, the largest weekly increase since mid-April.

OPEC is in no hurry to decide whether to pump more oil to make up for an expected drop in exports from Iran after the imposition of new USA sanctions, three sources familiar with the issue said, saying any loss in supply would take time. "There is no one who will realistically choose Iran over the USA", said energy consultancy FGE. "Iranian is not the only crude", the manager told Reuters.

Many analysts expect oil prices to rise as Iran's exports fall.

He also announced the US will re-impose sanctions against Iran, which will be rolled out in keeping with 90 day and 180 day wind-down periods.

Although the oil market is unlikely to be immediately disrupted by this long-expected move, a number of dynamic reconfigurations to oil flows - and indeed, to the balance of relations and power in the market - may follow over coming months and years.

People are guessing that the sanctions would reduce oil exports from Iran between 200,000 up to 1 million.

"China is the largest commodity producer in the world and the largest commodity consumer in the world, so it would make sense that Chinese futures that are close to the areas of supply and demand would be a more natural benchmark than the US markets", said Marwan Younes, founder and chief investment officer of Massar Capital Management in NY.

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"Our oil refineries are all geared around Iranian crude so we have to receive supply", said a source in Korea who closely monitors Iran.

In India, another major buyer of Iranian oil, refiners hope they can continue importing Iranian oil.

And Chinese refiners say there are alternative suppliers, including Russia, Saudi Arabia and exporters in West Africa.

During the last round of sanctions, India enjoyed waivers allowing limited Iranian oil imports paid for in rupees instead of US dollars.

Hours before of Trump's announcement, Iran's Petroleum and Engineering Development Company (PEDEC) CEO Nouroddin Shahnazizadeh had said in a briefing that renewed sanctions on Iran would be costly, but not to the extent to worry government officials, according to Shana, the official news agency of Iran's petroleum ministry.

Italy's Eni also continues to buy Iranian oil and it is buying 2 million barrels of oil per month from Iran under a deal that expires at the end of the year.

Although Donald Trump's decision to withdraw from the Joint Comprehensive Plan of Action was not a surprise, reinstating all USA nuclear-related sanctions was more than expected, said Barclays analysts in a research note.

Iran's exports are expected to decrease, as are foreign investments in the country. But fuel prices, spurred on by a steady streak of higher oil prices, continued to accelerate.

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