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Civil Unrest Threatens Miners Across The Globe

Civil Unrest Threatens Miners Across The Globe

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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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Iran Demands U.S. Apologize For “Illegal” Sanctions

Global oil markets are still adjusting to President Trump’s decision on Monday to not extend the 180-day waiver for Iranian oil imports to the country’s eight largest customers. On Thursday, global oil benchmark, London-traded Brent crude futures rose above $75/barrel for the first time this year. By 0705 GMT the benchmark pulled back to $74.90, but still an increase of 33 cents from the previous session.

Prices are also still receiving support from oil output cuts from the OPEC+ deal to trim 1.2 million bpd from markets as well as output cut-backs from Venezuela amid U.S. sanctions and in Libya as that country continues to be embroiled in fighting around Tripoli. Saudi Arabia, for its part, and not surprisingly, said yesterday that it saw no need to increase oil production after the Iranian oil waivers expire on May 2.

However, Saudi Arabia added that it would respond to customers’ needs if asked for more oil. Of course, it did not indicate how it would reply if asked for more oil production from President Trump - a likely development since oil has now breached the mid-$70s price point and is likely to hit the low $80 soon. Also on cue, in a line heard countless times before, Saudi oil minister Khalid al-Falih said he was guided by oil market fundamentals, not prices, and that Saudi Arabia remained focused on balancing the global oil market.

Though global oil markets are reacting to Trump’s Iranian oil waiver decision, the ramifications of more Iranian oil being removed from the market seems to be lost in Tehran, at least the official word coming from the government. On Wednesday, Iranian President Hassan Rouhani downplayed the effects of Washington's decision to end sanctions waivers on Iran's oil sales and dismissed any possible talks with the Trump administration which it claims uses the language of threat and force to demand negotiations.

Iran demands an apology

Addressing a cabinet meeting in Tehran on Wednesday, Rouhani said Iran has “always been people who favor talks and diplomacy as we are people of war and defense. Negotiations will be possible when all pressures are taken off, they (the US) apologize for their illegal measures and when there is mutual respect. Undoubtedly, demands by a knife-stabbing person who lies and is using force to hold talks are not accepted and we do not negotiate with a knife-stabbing person and with the formula of knife-stabbing, as accepting such negotiations means humiliation and surrender.”

Related: Russia Seeks New Arctic Oil Frontier

He added that the U.S. is “no way ready for negotiations” and said that Washington's four-decade-long plots against the Iranian nation have all ended in fiasco and failure for the White House. "And they will fail in their plots again," he added.

In reference to the impact of U.S. threats to reduce the country’s oil imports to zero, Rouhani said it “is not possible, we will sell our oil in different ways, while this move by the US is oppression against all the world nations, international oil firms and even its own nation." He also criticized both Saudi Arabia and Qatar for its close relations with the U.S. and accused both energy-rich Kingdoms of collaborating with Washington to benefit from Iran’s lost market share in oil markets.

While Rouhani is right that it’s not likely the U.S. can reduce Iran’s oil imports to zero, the removal of the 180-day waivers will continue to erode Iran’s oil exports and much-needed petrodollars it obtains from its oil sales. What is even more likely are the economic ramifications that the loss of more Iranian oil exports means for the country’s economy. Iran is already feeling the impact of renewed U.S. sanctions put in place in November, the loss of more oil revenue will only exacerbate its current economic woes.

Inflation in Iran reached nearly 50 percent last year, while food prices spiked over 70 percent, creating unrest and prompting Tehran to keep up its anti-U.S. narrative to deflect any responsibility it bears for bringing the sanctions in the first place. The collapse of the country’s currency, the rial, is also creating headwinds for the average Iranian, while recent media reports said the rial is in “crisis mode.” Even as far back as last April, a month before Trump announced the renewal of sanctions against the country, Tehran was being forced to intervene to prop up its currency.

Anyone trying to sell the rial at a rate other than the government fixed price would “be dealt with severely,” the government said. Since then, the rial has continued its steady devaluation, and will likely continue to do as U.S. moves continue to have an impact.

By Tim Daiss for Oilprice.com

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