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Oil price 'could hit $100' amid crisis over Iran and Venezuela

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WTI Crude Oil

"Since President Trump has not offered an alternative to improve the Iran deal - and instead insists on the need for a "better deal" - snap-back USA sanctions are likely to increase tensions on both sides of the Atlantic as the European Union navigates a hard balancing act between its JCPOA commitments and protecting its companies", Barclays said in a note. Those seeking waivers will be required to start reducing oil imports from Iran immediately. "If the situation in the Middle East becomes more unstable, the market will become more concerned about how oil supply will be disrupted".

Wednesday's oil surge brought prices to its highest prices in more than three years, according to CBS News.

Crude oil prices tried to continue their upward trajectory Thursday on actual and future supply drawdowns, but trends were offset by tepid USA consumer prices.

Production in the United States is surging thanks to the shale revolution. And if South Korea does not find some sort of common ground with the United States, it risks exacerbating a point of friction between two partners that can not afford to be out of lockstep in the messages - both explicit and implicit - being sent in a critical period to Pyongyang.

Iran re-emerged as a major oil exporter in 2016 after global sanctions against it were lifted in return for curbs on its nuclear program.

"Overall, Iran's production could be significantly curtailed if the Iran deal collapses, but not as much as it was with previous sanctions", it said. As a result, Japanese President Shinzo Abe is laser-focused on remaining in Washington's good graces. Hours before Trump's announcement, federal government forecasters raised their estimate for 2018 oil prices by 10.5% to an average of $65.58 a barrel. "Importantly, Iranian compliance with its JCPOA obligations may potentially help it find alternative routes to export crude oil to worldwide markets", Barclays says.

In addition, current trade tensions between China and the United States mean that Beijing is unlikely to support US action against Iran.

US President Donald Trump has pulled his country out of the nuclear deal with Iran, and plans to impose further crippling sanctions on the major oil producer.

India, the second largest importer of Iranian oil, is unlikely to be immediately affected by USA sanctions. Saudi Arabia signaled it could make up lost supplies, and Goldman Sachs Group Inc. said there's a chance prices may exceed its forecast.

Under the previous round of sanctions, India received waivers to purchase oil from Iran in rupees, rather than USA dollars, and now pays for Iranian oil using euros via European bank payment channels.

The EIA on Tuesday raised its forecast for USA output in its monthly report to 12 million bpd late next year. But Europe is unlikely to do so.

"The potential for oil prices to spike back towards $100 a barrel is no longer the distant threat that many had assumed a few months ago", he wrote in a note to clients.

The French leader has insisted the deal can still be saved, though it is unclear whether Iran would be willing to agree to the terms without the removal of U.S. sanctions. Yet analysts say Saudi Arabia would like to keep prices rising ahead of the IPO of its state-owned oil giant Saudi Aramco. Riyadh lost no time in assuring the market on Tuesday that it would compensate for any fall in Iranian supply.

Niels Christensen: Saudi Arabia said earlier this year that they would be pleased to see oil prices above $80 towards $100, and they have also been indicating that they are not going to change the re-agreement amongst the OPEC countries about production cuts, that is running until the end of the year and everybody expects that deal with Russian Federation and also other non-OPEC countries to continue into 2019, so that will also be a factor supporting the oil prices.

"The threat has helped oil prices rally, with Brent now at US$77pb, up 40% from the end of 2016".

OPEC kingpin Saudi Arabia indicated it was ready to act.

The International Atomic Energy Agency said Iran had been honouring its commitments under the deal.

Most analysts believe that at least some nations will ignore the new American sanctions and continue buying Iranian crude.

Trump telegraphed the move, and oil prices shot up in recent weeks as traders anticipated it.

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