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Can SA survive the fallout of US's decision to leave Iran deal?

14 May, 2018, 13:29 | Author: Sara Gill
  • Venezuela Oil Rig

Oil prices could rally to $100 a barrel next year, a level not seen since 2014, as supply risks in Venezuela and Iran strain global markets, according to Bank of America Corp. Military tensions between Iran and Israel have already mounted, and oil prices are rising on the uncertainty. The "These sanctions do impact all of the major industries", he added. The sanctions will not only bar USA companies from doing business with Iran, but they also will hurt European and other companies by prohibiting them from using American banks unless they cut links with Iran. There will be a 180-day period for countries to wrap up existing contracts and achieve "significant reductions" in their purchases of Iranian crude, although Mnuchin did not spell out what the administration meant by the term.

Prime Minister Theresa May and US President Donald Trump have discussed the Iran nuclear deal and North Korea in a phone conversation.

On Wednesday, a separate OPEC source had said Saudi Arabia was monitoring the impact of the USA move on oil supplies and was ready to offset any shortage but would not act alone. "When the American sanctions are in place, importing equipment to Iran for a joint project would be a problem". But Chinese refiners said there were alternative suppliers, especially in Russia, Saudi Arabia and West Africa.

While the chants of "Death to America" were few, Iranians are sincerely angry over Trump's decision and many are siding with the hard-liners, who have always been suspicious of the West.

British Prime Minister Theresa May and Trump agreed in a phone call that talks were needed to discuss how USA sanctions on Iran would affect foreign companies operating in the country.

Meantime, it seems that the oil market is already in a bit of a supply/demand deficit.

United States crude inventories C-STK-T-EIA fell by 2.2 million barrels in the week to May 4, to 433.76 million barrels, according to the Energy Information Administration (EIA), slightly above the 420 million barrels five-year average level. US output is creeping closer to that of top producer Russian Federation, which pumps about 11 million bpd. The harsher approach by the United States could result in an initial loss of about 500,000 barrels a day (bpd) in Iran's output, which is now 3.8 million bpd. It may signal stronger-than-expected demand in Asia and underpin prices.

The Iran-Saudi conflict in Yemen looks to have escalated. That has stoked fears of shortfalls given the continuing declines in Venezuelan oil production and growing geopolitical risks to oil supplied by Libya, Nigeria, and elsewhere.

He said the effects of the USA move were already being felt in rising oil costs and an increase in political uncertainty in the Middle East.

This would make the United States the world's largest producer, ahead of both Russian Federation and Saudi Arabia.

The EIA on Tuesday raised its forecast for US output in its monthly report to 12 million bpd late next year.

Cilliers said the effect of these actions on oil prices could undo the boost to the South African economy since President Cyril Ramaphosa took office. That's about 1 million barrels a day more than in early 2016.

Analysts had little hope that opposition to the US action would prevent sanctions from going ahead.

Russian Federation lacks the expertise to develop complicated new projects, which could result in output peaking in 2020 and declining thereafter.

Market also continue to weigh a steady increase in USA production levels as the rise in US drilling marked one of the few factors pressing back crude/fuel prices.

USA drillers added rigs for the sixth straight week, bringing the total rig count to 844, highest since March 2015, General Electric Co's Baker Hughes energy services firm said. That was the fifth consecutive weekly increase in the rig count, underscoring worries about rising US output. As oil can be freely traded, there is, broadly speaking, one world oil price. PSA Peugeot Citroen, for example, sold more than 3.6 million vehicles worldwide a year ago.

The Trump government previously announced that the United States would withdraw from the Trans-Pacific Partnership free trade agreement and the Paris Agreement on countermeasures against climate change. The Trump ad-ministration has drawn a hard line, demanding a $200 billion cut in the Chinese trade surplus with the United States, sharply lower tariffs and advanced technology subsidies.



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