Iran says new sanctions by USA would not stifle its oil industry

Virginia Carson
May 14, 2018

Ross Harvey, lead for extractive industries and governance of Africa's resources programme at the South African Institute of International Affairs, spoke to Business Day TV about the possible risks to SA of Trump's decision to leave the nuclear deal with Iran.

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.

US West Texas Intermediate (WTI) crude futures also marked a November 2014 high, at US$71.84 a barrel, before edging back to US$71.78 a barrel.

The Trump government has concluded that the 2015 agreement, which the USA administration of then President Barack Obama and five other countries - Britain, France, Germany, China and Russian Federation - signed with Iran can not prevent the country from possessing nuclear arms.

The threat of new sanctions comes amid an oil market that has been tightening due to strong demand and as top exporter Saudi Arabia and top producer Russian Federation have led efforts since 2017 to withhold oil supplies to prop up prices. "Overall the market still looks poised for higher levels".

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That appears unlikely after U.S. Treasury Secretary Steven Mnuchin said on Tuesday that licenses for the planemaker and rival Boeing Co (BA.N) to sell passenger jets to Iran would be revoked.

The bank's analysts wrote Thursday that collapsing oil production in Venezuela and potential export disruptions in Iran could push the price of Brent crude as high as $100 per barrel in 2019.

The price for Brent crude oil, the global benchmark, was down 0.25 percent as of 9:16 a.m. EDT to $77.28 per barrel. Aside from the mounting military tensions between Iran and Israel, oil prices are rising on the uncertainty. Sales to Europe are seen by analysts as the more likely to be reduced by the sanctions. But U.S. shale output, while flexible, still takes six to 12 months to respond to price changes and is determined by the decisions of thousands of individual firms, not by the government. "The Europeans are in the weaker position because they are not united", said Peter Beyer, Germany's commissioner for transatlantic relations.

Britain, France and Germany issued a joint statement expressing regret and concern over the USA decision. They will grumble and accept it.

Khatami, who has echoed sentiments of Supreme Leader Ali Khamenei who says Israel will not exist in 25 years, said the Jewish state could face destruction if it continues to challenge Iran.

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Futures slipped back in NY on Thursday after earlier advancing as much as 1.1%. "As before, it may take several rounds of reductions to reach target levels", FGE's founder and chairman Fereidun Fesharaki wrote in a note.

Under the accord, Iran agreed to limit its nuclear program and allow worldwide inspections in return for the lifting of nuclear-related economic sanctions by western countries.

"For the first time, Iran has the chance to show the world they are not the rogue nation they are always presented as, that they negotiated in good faith and keep to their commitments", said Karim Emile Bitar of the Institute for global and Strategic Studies in Paris.

Outside OPEC, the climbing USA crude oil production may be able to fill Iran's supply gap.

In October a year ago, India sent its first shipment of wheat to Afghanistan through the Chabahar Port.

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