Oil prices under pressure since Trump’s Iran announcement
Oil prices have been a bit of a roller-coaster ride so far this year, going up and down between its lowest point of $59 (£43) per barrel in February on the West Texas Intermediate (WTI) index to peaking earlier this month at almost $72 (£53).
The news of President Donald Trump’s decision to pull the US out of the Iran nuclear deal sent oil prices surging, reaching a four-year-high due to the uncertainty that comes with the sanctions that may be reimposed on Iran.
When the US again sanctions Iran, their output will be reduced which will create tighter supply of oil around the world and increase the price of oil and petrol. This might mean that by the end of the year, the US will be the world’s largest producer of oil.
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The chief executive of Sun Global Investment Mihir Kapadia said: “Oil markets have been cautious as the current impact of the US sanctions on Iran remain unclear, with European and Asian allies continuing to resist Trump’s call to pull out of the JCPOA.”
“With information unclear on how this would affect Iran’s oil and gas industry, coupled with the continued rise in American drilling, oil prices have been under pressure the past couple of days,” he said.
Before the Iran nuclear deal, the US sanctioned Iran’s oil production in 2012 which reduced the output from 2.5m barrels per day to just over 1m. After the deal the production grew again and Iran had hoped to grow their output to around 4.7m barrels per day over the next four years.
Oil and gas analyst for Hydrocarbon Capital Malcolm Graham-Wood predicts that about 1m barrels of oil will go off the market following the decision, reducing the supply of oil which was tight from before.
He did not exclude the possibility that oil prices per barrel could increase to as much as $100 (£74) at some point this year saying that the industry had the potential to do it.
Read more: Oil prices rise as UK, Germany and France urge US rethink on Iran deal