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Oil jumps after USA abandons Iran deal, plans 'highest level' sanctions

14 Mai 2018

The Kremlin will have to weigh its alliance with Iran in the Syrian conflict against the new bond forged with Saudi Arabia and the temptation of boosting production of Urals crude that could replace Iranian barrels in Europe. Kuwait later gave a similar assurance. Both tried to change Trump's mind on Iran during visits to the White House in April, and both failed.

Hedge funds and money mangers slashed their bullish wagers on US crude in the latest week to the lowest level in almost five months, the US Commodity Futures Trading Commission (CFTC) said on Friday, in an indicator that many financial oil traders are doubtful of significant further price rises. "With prices moving close to $US80 a barrel and with a great opportunity presented to Saudi Arabia and Russian Federation to regain market share without crashing the oil price, we think there is a good chance the current OPEC+ deal will end by the end of 2018, if not before". To the chagrin of Saudi Arabia, this might also dent their plans to issue their IPO when oil was at its highest relative price.

Several refiners in Asia said they were seeking alternatives to Iranian supplies. While Trump's withdrawal from the Iran nuclear deal might be meant to show Kim Jong Un that the U.S. president follows through with his threats, it may also reinforce fears that Washington's negotiations can not be taken seriously - and that Pyongyang still needs its nuclear deterrent to ensure its survival.

As Jack Welch said: "We will have to face reality as it is, not as it was or as we wished for it to be". Preventing the two countries from having a nuclear-weapon capability and competing in a nuclear arms race is the goal. Total volume traded was about 8 percent below the 100-day average.

Oman, the back-channel for US-Iran talks that paved the way for the 2015 accord, said Wednesday "the option of confrontation is not in the interest of any party". By midway through last week, European diplomats "felt like we were going through the motions", a European official said.

Crude lifting on Middle East concerns once again.

Neither the Trump administration nor Saudi Arabia will want to be blamed for driving oil prices significantly higher.

Washington's allies may find formulas to avoid sanctions exposure. As a outcome, companies worldwide must stop doing business with Iran or risk US fines or other punishment. Iran does not seem to like the OPEC deal anyway, so this is exactly what we expect Iran to do.

Trump said his decision to leave the JCPOA was created to counter that possibility. And any sizable cut in Iranian oil production could exacerbate what has been a tightening global oil supply.

US President Donald Trump's unilateral abandonment of the Iran nuclear agreement, while rejected by statements by the UK, French and German governments, may well offer European powers the opportunity to achieve their aims for the Middle East, which are not fundamentally different from those of the US.

On Wednesday, a separate OPEC source had said Saudi Arabia was monitoring the impact of the US move on oil supplies and was ready to offset any shortage but would not act alone. U.S. Treasury Secretary Steven Mnuchin said the companies' existing licenses to sell planes to Iran would be invalidated.

Trump's message to the Europeans in the run-up to his announcement was that they must come up with a way to toughen the nuclear deal if the United States was to remain in it, said sources familiar with the discussions.

The Sunni-ruled kingdom, which is fighting Shiite rebels known as Houthis in Yemen, accuses Iran of supplying the Houthis with ballistic missiles that have targeted the kingdom, including the capital, Riyadh.

Oil jumps after USA abandons Iran deal, plans 'highest level' sanctions