Economy

Setback for Modi after Trump's withdrawal from Iran nuclear deal

Setback for Modi after Trump's withdrawal from Iran nuclear deal”

Trump pulls the United States of America out of the Iran nuclear deal.

Sanctions come amid an oil market that has already been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and top producer Russian Federation have led efforts since 2017 to withhold oil supplies to prop up prices. Richard Nephew, senior research scholar at Columbia University's Center on Global Energy Policy, added that China and India may continue to buy Iranian oil even in the face of US sanctions, negating some of their impact. US oil output reached another record high last week, hitting 10.7 million bpd.

"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. He also said the USA would not succeed in hurting the Iranian economy by reimposing nuclear-related sanctions. A 20 percent reduction was an unofficial rule of thumb during the Obama era.

He argued that even if the deal collapses entirely, the members of Organization of Petroleum Exporting Countries (Opec) can tap some 3.3 million barrels per day of spare capacity to fill any supply shortfall from Iran.

"We're going to be encouraging them to reduce those investments", Peek said, referring to European nations dealing with Iran.

Since the sanctions were lifted in 2016, major European companies, partly wary of the remaining USA sanctions on Iran, have been reluctant to do business with Tehran, which needs to attract over $100 billion in foreign investment to boost its crude output. Both the IEA and Saudi Arabia issued statements saying they will monitor the status of the oil market and step in if a shortage materializes.

Mr Ng suggested that these triggers are significant enough to even tilt the oil market "into deficit". A muted reaction from Iran would paint the U.S.as the aggressor, allowing Iran to more latitude to skirt USA enforcement. It broke through the $60 barrier earlier this year, and now just a few months later, is knocking on the door of $70.

Outside OPEC, soaring USA crude oil production could help to fill Iran's supply gap.

"We believe the previous 1 million bpd limit for exports (imposed during previous sanctions) will be reimposed". "The major concern in Tehran is not around volumes of crude that it could sell - not in the short to medium term at any rate - but over transfer of payments for those volumes", according to Argus Media.

Goldman Sachs Group predicts that Brent will rise to $82.50 a barrel in the coming months, and says there's a chance prices could surpass that level, but sees oil subsiding again in 2019.

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



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