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Oil Prices Fall as US Output Reaches New High

May 1, 2018 at 20:05 by Matt Jackson

Oil prices have fallen on Tuesday, as news emerged that US oil production had risen to over 10.2 million barrels per day in February. The rise wiped out Monday’s gains and consumed some of last week’s increases, despite continued uncertainty over whether President Donald Trump will reimpose sanctions against Iran.

The EIA releases weekly stockpile data on Wednesday, and the American Petroleum Institute will release its own figures later today.

Trump has long stated his dismay over the Iran nuclear deal. In 2015, then President, Barrack Obama, signed a deal that lifted heavy sanctions against the world’s fifth largest oil producer. This was done on the proviso that they minimize nuclear power production and cease producing enriched uranium for use in nuclear weapons. The nation agreed, and signed the deal, but Trump and his administration have claimed that they have flouted the agreement ever since.

The deal has been brought into the spotlight recently, not only because Trump is due to make a decision by May 12 as to whether he will extend the existing deal, but because Israeli Prime Minister, Benjamin Netanyahu, said that he has documents that prove Iran is still producing nuclear weapons.

Iran has defended itself against the claims, stating that they have stuck to the deal and that Netanyahu is simply retelling old lies. French President Emmanuel Macron is still trying to salvage the deal, but most analysts believe it is a foregone conclusion that Trump will back out of the agreement. He is more likely to impose sanctions against the Iranian government, which will mean disruption to oil supply.

Iran is the fifth largest oil producer in the world, and the third largest OPEC producer. In 2016, they produced approximately 4 million barrels a day, and while this is less than 5% of the global supply, it would represent a significant shift in oil supplies and would have a major impact on prices.

The potential disruption, and the likely sanctions against Iran, however, have already been priced in to oil, which means that unless a significant change of opinion occurs, or until Trump’s decision is finally announced, this is unlikely to have a major impact on price.

Oil prices ended the day with WTO crude down 1.59% to $67.48 while Brent crude fell 1.86% to $73.30.

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