Brent oil prices topped $75 in early trading on Tuesday as the market grows increasingly worried that the chance of renewed U.S. sanctions on Iran is growing and as Tehran rhetoric flared up.
Prices then fell back, with WTI Crude was up 0.23 percent at $68.80 and Brent Crude was up 0.04 percent at $74.04.
Today was the first time since November 2014 that Brent hit $75 and, according to analysts, the possibility of sanctions on Iran has been the most significant driver of the oil price rally in recent weeks—the other being the virtually eliminated global oil glut combined with robust oil demand growth.
“Currently, all bets are off on the U.S. staying in the nuclear agreement,” Tamas Varga at oil broker PVM told Reuters.
U.S. President Donald Trump has until May 12 to decide whether to waive the sanctions on Iran. At the last waiver in January, President Trump warned that it was the last such waiver, “but only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal.”
Tehran, for its part, toughened the rhetoric today.
On Tuesday, a senior Iranian official, the secretary of Iran’s Supreme National Security Council, Ali Shamkhani, said that Tehran might quit the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) should the U.S. walk out of the nuclear deal that Iran signed with global powers in 2015.
The Atomic Energy Organization of Iran was ready for some “surprising actions” if the deal were to be scrapped, Shamkhani said at a news conference broadcast on state television, as carried by Reuters. Related: What Is A ‘Fair’ Price For Oil?
Asked about Iran withdrawing from NPT, Shamkhani said: “This is one of three options that we are considering.”
Iran’s President Hassan Rouhani also stepped up the war of words on Tuesday, saying in a speech:
“I am telling those in the White House that if they do not live up to their commitments...the Iranian government will firmly react.”
“If anyone betrays the deal, they should know that they would face severe consequences,” Reuters quoted Rouhani as saying.
By Tsvetana Paraskova for Oilprice.com
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Moreover, a re-introduction of sanctions on Iran will neither impact on the global oil market nor on oil prices. Iran’s oil exports will not lose a single barrel of oil as a result of the forthcoming sanctions. Moreover, Iran will be pricing its oil exports and paid for its exports by the petro-yuan thus bypassing the petrodollar and also nullifying US sanctions.
The European Union (EU) is not going to walk away from the Iran nuclear deal and therefore it will not be imposing any sanctions on Iran thus further weakening US sanctions.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London