Oil prices reach highest since November 2014 on Venezuela, Iran worries

Oil prices reach highest since November 2014 on Venezuela, Iran worries”

Restoring sanctions on Iran could affect as many as 1 million barrels per day of crude supply.

At least one analyst has downplayed the importance of crude to the overall economy.

A hike in oil prices had earlier dissuaded the Reserve Bank of India from softening lending rates to levels that could help accelerate growth in the economy. Riley FBR, told Bloomberg television that global supply and demand balances were achieved "a lot quicker" than originally expected, and that there is a "natural increase in the price per barrel of oil that's coming from both supply and demand being in balance and the equity complex just not playing along yet".

Meanwhile, Venezuela, another big oil country, is in an economic depression. The drop in oil prices from around US$115/barrel in mid-2014 (reaching a high of around US$145/barrel in 2008) to around US$25/barrel in 2016 has given us the synchronised global growth upswing of 2017.

In a roller-coaster day of trading, United States crude oil prices fell more than 4% before the announcement, rebounded as Trump spoke, dropped again and then recovered later in the day to trade above $70 once more.

USA crude settled at $70.73 per barrel.

Trump has threatened to walk away from the 2015 agreement by not extending sanctions waivers when they expire on May 12, which would likely result in a reduction of Iran's oil exports.

ENERGY: Oil prices declined as traders waited for the White House's decision on Iran.

"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". Saudi Arabia will also have an easier time convincing all of its partners, including Russian Federation, to extend quotas into 2019.

"The kingdom [will] work with major producers within and outside OPEC, as well as major consumers, to mitigate the impact of any potential supply shortages", the official Saudi Press Agency said, citing a statement from the ministry.

Iran ships about 2.5 million barrels a day. It removed sanctions against Iran while allowing global nuclear inspectors to visit the country's sites.

"What the full impact on Iranian flows will be is still hard to estimate", said Petromatrix strategist Olivier Jakob. That figure rises to less than 500,000 barrels per day after six months.

In addition, if tension between Iran and Opec or non-Opec producers flares up, there will be efforts to raise production capacity, which could be used as a viable political leverage against Iran.

ANALYST'S TAKE: "Geopolitical risks are heightened especially if Iran retaliates, but it could wait and see if the deal is completely undone or if there is scope for it to continue without the U.S.", Mizuho Bank said in a daily commentary.

Saudi Arabia, for instance, has the ability to crank up output.

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