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Oil Prices Slide but Supported by Continuing Geopolitical Concerns

April 27, 2018 at 13:45 by Matt Jackson

Oil prices have reduced slightly on Friday, but their decline has been halted by continuing concerns over the Iran nuclear deal and whether the US will extend the existing deal, introduce new sanctions, or completely walk away from any deal. The cooling of tensions between North and South Korea, which comes ahead of the proposed meeting between North Korean leader, Kim Jong Un, and US President, Donald Trump, are also dictating prices. Finally, the deteriorating political situation in Venezuela is influencing the market. Both WTI and Brent crude have seen slight losses for the day, down 0.22% and 0.09% respectively.

The recent rise in oil prices has caused drillers to increase activity, leading to an increase in US exports and an increase in overall supply. This has caused prices to dip slightly on Friday’s trading, but the drop has been halted by continued geopolitical concerns.

The market is still concerned by whether President Trump will renew sanctions against Iran. He is set to make a decision by May 12 whether to continue with the nuclear deal that was signed by former President Obama, or whether he will introduce new sanctions against the oil producing country. Sanctions would impact oil supply from Iran, which would cause prices to increase in line with the changes. Analysts have found it difficult to accurately predict Trump’s decision, though the overall sentiment is one that he will choose to impose some form of sanctions.

There is additional support coming from the increased political and economic problems in Venezuela. Although not the largest oil producer, Venezuela still supplies a sizable amount of oil to the world market. Their production has already declined, and there are concerns that this decline will continue.

Some price opposition may also have come following the meeting between North Korean leader, Kim Jong Un, and his South Korean counterpart, Moon Jae-in. The two parties seem to have struck an accord, vowing to reunite as one country and working towards the denuclearization of the Korean peninsula. President Trump is set to meet with Kim Jong Un in June, or possibly earlier, and further cooling of hostilities is likely to mean that prices will head down.

WTI crude was down 0.22% at $68.04, with Brent crude trading down 0.09% at $73.81 at 14:20 GMT.

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