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Oil Prices Steady As OPEC Says It Will Meet Iranian Shortfall Following US Sanctions

May 14, 2018 at 13:47 by Matt Jackson

Despite an increase in tensions in the Middle East, a promise by OPEC to offset Iranian supply loss has helped steady oil prices and prevent further losses, as were seen on Friday. WTI crude has remained below $71 on Monday’s trading while Brent crude has remained above $77.

US President Donald Trump announced last Tuesday, May 8, that the country would be withdrawing from the Iranian nuclear deal and would reimpose sanctions against OPEC’s 3rd largest oil producer. The sanctions will begin in November, and countries that continue to buy oil from Iran may face additional tariffs when conducting business with the US. Despite the threats, the remaining Joint Comprehensive Plan of Action (JCPoA) members are trying to resurrect the remnants of the deal.

On the US withdrawal, the oil market responded with increasing prices, culminating in the commodity reaching its highest prices in 3 years. However, some profit taking stalled the increase at the end of last week, but European and Chinese resistance to the USA sanctions has led to slight increases in trading today.

Some of the worry has been further offset by a statement from OPEC, declaring that they would help to fill any supply shortfall that arose because of the changes.

Furthermore, US companies have increased their drilling output, which would mean more oil hitting the market, potentially making up for the estimated 500,000 barrels a day that will be lost as a result of sanctions being renewed against Iran.

Despite the good news, there has been more fighting in Syria. This time, Israeli forces have reportedly killed dozens of Palestinians, who were protesting against the US embassy move to Jerusalem. Official sources have said that the death toll has now reached 41 people and looks certain to rise as forces clash on the USA’s decision to move its embassy from Tel Aviv to Jerusalem.

WTI crude rose 0.13% to $70.79, while Brent crude moved up 0.31% to trade at $77.36 per barrel at 14:30 GMT.

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