Oil Gains as Israel and Iran Clash After Trump's Sanctions Move

Oil Gains as Israel and Iran Clash After Trump's Sanctions Move

The bank's analysts wrote Thursday that collapsing oil production in Venezuela and potential export disruptions in Iran could push the price of Brent crude as high as $100 per barrel in 2019. "While prices are now rising on Trump's decision to reimpose sanctions on Iran, we may see some limitations to the rally as any lost volumes can be supplied by other producing nations".

Trying to ease market concerns, Saudi Arabia said on Wednesday that it would work with other producers to diminish the impact of any shortage in oil supplies.

Investment bank Goldman Sachs said in a note that Trump's announcement brought upside risks to its forecast that Brent crude will hit $82.50 United States a barrel by the summer. In the USA inventory levels are now below the five-year average.

"Although re-imposed U.S. sanctions on Iran will not have the same reach as the multilateral sanctions that were put in place to get Iran to come to an agreement in 2015 in the first place, this decision by Trump is still significant in terms of the potential broader regional impact of worsening relations between Washington and Tehran", Kiernan said.

"For the US economy, a prolonged rise in oil prices could reverse part of the benefits from the fiscal stimulus", Daco wrote. It's unlikely for now.

Iranian forces based in Syria fired 20 rockets at Israeli front-line military positions in the Golan Heights early on Thursday, the Israeli military said, triggering an Israeli reprisal and escalating already heightened tensions in what appeared to be the most serious violence in years.

One factor that could prevent markets from tightening further is soaring U.S. oil output.

Another factor that's helping to reduce supply is an agreement between OPEC and other major producers including Russian Federation to slash output. That plan could be revisited at the next Opec meeting in June. Jeff Klearman, portfolio manager at GraniteShares exchange traded funds, said he sees WTI prices holding in their recent range of $60 to $70, provided the strong demand from the European Union and United States continues, which may require prices staying around that level.

Donald Trump's plan of isolating Iran is quite likely to backfire
Global agencies responsible for inspecting compliance have said that Iran was in full cooperation with the agreement's terms. Commenting on the US withdrawal from the agreement, he said: "The 2015 deal only tackled Iran's nuclear role".

He said: "We believe the deal does not deal with Iran's ballistic missile program nor does it deal with Iran's support for terrorism". There is a lot of uncertainty in the market which stems from the White House itself, said Eric Armitage, chief investment officer of East Alpha, a hedge fund specializing in energy.

Oil prices steadied near 3-1/2 year highs on Friday as the prospect of new US sanctions on Iran tightened the outlook for Middle East supply at a time when global crude production is only just keeping pace with rising demand.

Looks like OPEC is at it again.

In reaction to a Tweet last month by Trump that accused OPEC of "artificially" boosting oil prices, Zanganeh said "Trump is not honest about oil prices ..." No good and will not be accepted!

Trump telegraphed the move, and oil prices shot up in recent weeks as traders anticipated it. "He wants higher prices".

"The three or four-year period of quiet in terms of geopolitics impacting oil markets is over", said Canary's Eberhart.

"You would really need something material on the ground that would stop flows of oil to get into the triple digits", Melek said.

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