Oil drops on doubts that Trump will impose sanctions on Iran

  • Oil drops on doubts that Trump will impose sanctions on Iran

Oil drops on doubts that Trump will impose sanctions on Iran

New sanctions will likely include measures against Iran's oil and shipping sectors, said Ehsan Khoman, head of research for Middle East and North Africa at Mitsubishi UFJ Financial Group, with 180 days for those industries to adjust.

Trump on Monday said a decision on Iran would be announced at 2 p.m. EDT on Tuesday.

The Organization of the Petroleum Exporting Countries is in the midst of an oil supply-cutting deal with non-OPEC producers such as Russian Federation that has helped erase a global glut and boosted oil prices to $76 a barrel, the highest since 2014.

Since then, Iran ramped up its production and oil exports.

However, some analysts say the sanctions will only have a limited impact on the oil market because some importers like China and India will refuse to cut shipments.

"Iran's exports of oil to Asia and Europe will nearly certainly decline later this year and into 2019 as some nations seek alternatives in order to avoid trouble with Washington and as sanctions start to bite", said Sukrit Vijayakar, director of energy consultancy Trifecta.

Stocks are ending little changed and oil prices fell after President Donald Trump said the US was withdrawing from a landmark nuclear deal with Iran and would reimpose sanctions on the country.

Similar sentiments prevail in Asia.

"We see the move (if completed) as positive strategically in terms of creating a stronger, converged operator", said UBS analysts, adding that the absence of an equity issuance to fund the deal was a positive.

Japan's Foreign Minister Taro Kono said on Wednesday that his country supported the agreement, which "helps to strengthen worldwide non-proliferation and the stability in the Middle East".

"U.S. sanctions could affect various industries".

Several refiners in Asia told Reuters they were already seeking alternatives to supplies from Iran.

"The labour market is hot and getting hotter by the day so central bankers need to continue to take the punch bowl away because higher wages and greater inflation are on the way", Chris Rupkey, chief economist at MUFG in NY, told Reuters. Several companies, including Airbus, Boeing and Total, have struck business deals in Iran and could be looking for exemptions if USA sanctions are imposed again.

"On top of the incremental Canadian barrels that should hit the global oil market, we also see more supply coming from Opec". If they continue to go up.

South Korea had been buying condensates from Qatar and the US, but after the lifting of sanctions on Iran in 2016, local oil refiners sharply jacked up the imports of the gassy ultralight fossil fuel from the Middle Eastern country.

When sanctions were loosened against Tehran in 2016, India ramped up imports from Iran to nearly 900,000 bpd in late 2016, but intake has fallen back to around 500,000 bpd since the start of the year.

That made Iran the third biggest exporter of crude within the Organization of the Petroleum Exporting Countries (OPEC), behind Saudi Arabia and Iraq.

DOUBLE DOSE: Shire rose 4.6 percent to $40.35 after the Ireland-based pharmaceutical company agreed to be acquired by Japanese drugmaker Takeda in a deal worth $62.4 billion.

"I think we're going to $80", said Eric Nuttall, senior portfolio manager at Ninepoint Partners in Toronto, referring to crude oil prices.

The Brazilian real hit a near two-year low and the Turkish lira reached a record low.