Higher Gas Prices Could Follow Trump's Exit From The Iran Deal

Howard TerryMay 14, 2018

"It's the same witches brew of bullish stuff: Iran, Venezuela, the lack of alacrity by Saudi Arabia to bring more oil onto the market", said John Kilduff, partner at Again Capital in NY.

Oil prices rose in response to the announced measures. More than 507,000 lots of front-month Brent crude futures changed hands, the highest since early February.

Singapore added 0.3 per cent with Manila and Wellington also in positive territory.

Asian equity markets continued Monday's broadly positive performance. He noted that such triggers tend to induce larger gains in the higher leveraged counters.

"Higher prices are more than likely to be capped as".

But he pointed out that significant re-ratings of O&G-related stocks will come only after institutional investors return to the sector. "The composition of what happens when we sit down with the Iranians is several stages out".

Market watchers generally agree that the outlook for oil prices remains hazy as the health of the oil market is subject to one too many unknowns.

"The recent rally in oil lost some momentum after Saudi Arabia said it will step in with more crude supplies to mitigate any supply shortage that results from the United States withdrawing from the Iran accord", UOB Bank analysts said Friday.

Oil prices clocked up more multi-year highs yesterday as traders adjusted to the prospects of renewed USA sanctions against major crude exporter Iran amid a tightening market. This after the global refinery system just ramped up again after the September or October maintenance programme.

Brent crude futures were up 29 U.S. cents at $77.50 a barrel by 9.33am GMT, having gained 3.5% so far this week, the largest weekly increase since mid-April.

U.S. President Donald Trump speaks to reporters after signing a proclamation declaring his intention to withdraw from the JCPOA Iran nuclear agreement in the Diplomatic Room at the White House in Washington, U.S. May 8, 2018.

Iran's exports are expected to decrease, as are foreign investments in the country.

The U.S. leader said that if Iran restarts work on nuclear weaponry, there would be a "very severe outcome".

"We will be instituting the highest level of economic sanctions", Trump said.

The oil price rose on Thursday and was set for its largest weekly increase in a month, as the market prepared for potential disruption to crude flows from major exporter Iran in the face of USA sanctions.

UOB Kay Hian equity analyst Foo Zhi Wei countered however, that the worldwide community may try to salvage the Iran nuclear deal.

Trading volumes in both contracts rose, with about 1.2 million front-month WTI contracts changing hands, its busiest trading day since the OPEC agreement to cut output was struck on November 30, 2016.

"We believe the previous 1 million BPD (barrel per day) limit for exports (imposed during previous sanctions) will be reimposed". She suggested that the next Opec meeting in June should provide more flavour on the metrics the cartel may turn to in order to decide on any extensions for the production cut agreement.

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