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Mixed Messages Cause Oil Prices to Slump

May 8, 2018 at 16:03 by Matt Jackson

Mixed reports over the Iran nuclear deal have caused oil prices to plummet on Tuesday. Both WTI and Brent crude prices have fallen more than 3% as Bloomberg and CNN publish conflicting stories and as the world awaits news of Trump’s decision on the maligned Iranian nuclear deal.

Oil prices have fallen from 3 1/2-year highs as the market awaits President Trump’s decision on the Iran nuclear deal.

On Tuesday, Bloomberg published a report stating that Trump would announce new sanctions against Iran, but they also said that the USA would not completely pull out of the deal. They cited CNN as the primary source of the story. However, the CNN piece itself stated that Trump would reimpose sanctions that were lifted as part of the accord; a move that would signal a withdrawal. An official announcement is expected at 14:00 ET.

Iran currently exports around 2.5 million barrels of oil per day. They are OPEC’s 3rd largest producer of oil. Renewed sanctions against the country would likely lead to a dearth in supply of oil, but most analysts believe that this potential has already been accounted for in the recent increase in prices.

According to the terms of the current deal, the USA is expected to make an announcement on May 12 regarding whether they will continue to honor it. However, Trump has said that he will make an announcement today, May 8.

Observers have said that while they believe Trump will pull out of the deal, which he has previously described as being insane, they do not believe that he will go any further than this. As sanctions have already been built into current oil prices, this would likely mean oil prices will retrace back down on the announcement. Investors are taking profits on the 3-year highs that had been reached in the past couple of weeks.

Brent crude peaked at more than $76 on Tuesday morning trading, but the mixed messages have led to a fall of 3.02% with a price of $73.87. Meanwhile, WTI crude has fallen 3.65% to $68.15 having reached nearly $71 in the morning.

If you have any questions and comments on commodities today, use the form below to reply.

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