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Oil Hits $80 As the Market Weighs Up Iran Sanctions

May 17, 2018 at 12:47 by Matt Jackson

Oil prices surged past $80 per barrel on Thursday amid fresh fears of US sanctions. US President, Donald Trump, has suggested that secondary sanctions could be imposed against European companies that continue to deal with Iran. Experts have warned that if European countries also pull out of the deal then it would lead to Iran going back on their side of the deal. Some companies, including Total SA, have announced that they will be withdrawing, unless they receive a waiver from the USA.

Prices have surged since President Trump first announced that he would be withdrawing from the Joint Comprehensive Plan of Action (JCPoA). While prices stalled a little during trading yesterday, fresh worries have caused further increases today.

Experts have said that approximately 400,000 barrels a day could be withdrawn from market supply as a result of the collapse of the JCPoA, with Iran being OPEC’s third largest producer by volume.

Despite the news, there has been signs of slowing demand, and higher prices could exacerbate the problem, as buyers become unwilling to meet the inflated price tags. If other OPEC countries, including Saudi Arabia, the world’s largest oil producer, stop withholding supply. The oil producing nation has previously stated an ultimate goal of $80 or even $100 per barrel. With prices now hitting $80, they could withdraw their support from this arrangement. However, Saudi Arabia has also stated its intent to plug the hole left by Iran, if they are forced to stop supplying oil.

Total SA has said that it intends to withdraw from the deal to develop the South Pars field in Iran. The deal was worth $1bn and Total have said that they will walk away unless they receive a waiver from the USA, which would effectively allow them to continue with impunity.

WTI crude was trading up 0.98% at $72.19 per barrel, while an increase of 0.95% means that Brent crude was trading at $80.03 per barrel at 13:00 GMT.

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