How Shell could be hit by Iran deal pull-out

In the wake of new USA sanctions, some buyers of OPEC's third-largest oil producer said on Wednesday they would seek US exemptions to purchase Iranian crude. This will make it challenging for European countries, for example, to keep the nuclear deal in place since USA sanctions threaten their businesses with various punishments if they keep doing business in Iran. European and American companies could lose billions of dollars in commercial deals struck since the 2015 Iranian nuclear accord, and lose access to a major new export market.

Iran's previous highest post-sanctions crude exports were 2.44 million b/d in October 2016, the report said.

The Organization of the Petroleum Exporting Countries, Russia and several other producers began to reduce oil output in January 2017 in an attempt to erase a supply glut and prop up prices.

America's European allies were dismayed by the decision, which fell even as London, Paris and Berlin were trying to negotiate a tougher accord to placate Trump.

Oil prices steadied near 3-1/2 year highs on Friday as the prospect of new USA 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.

But traders and end-users in China will have to contend with higher freight cost when dealing with Iran as shipping capacity will be limited amid global sanctions, she said.

Similar sentiments prevail in Asia.

He added that there was a "perfect storm for higher prices" owing to crude-rich Venezuela's economic woes, which have been made worse by fresh United States sanctions. He added that Japan would "carefully analyse the impact that this announcement would have". "It is possible that we will face some problems for two or three months, but we will pass through this", Rouhani said, adding that Iran would like to keep "working with the world and constructive engagement with the world".

"With Trump's announcement he didn't go half way, he didn't go a quarter of the way, he went all the way", said one senior European Union official, who also noted new USA ambassador to Germany Richard Grenell's post on Twitter, ordering German companies to "immediately" unwind their business dealings in Iran.

For Saudi Arabia, that is "fine" because it means the return of sanctions and ratcheting up pressure on Iran in the region, including by Israel.

This would make the United States the world's largest producer, ahead of both Russian Federation and Saudi Arabia.

"These sanctions do impact all the major industries (in Iran)".

Trump's withdrawal from the nuclear deal with Iran, which has pushed up the price of oil, thus benefiting Shell and other oil companies, threatens to put billions of dollars worth of trade in jeopardy. Given the availability of alternative supplies, most European buyers will want to steer clear of Iranian supplies altogether, and their purchases will drop off well before the 180-day mark.

"The oil supply/demand balance is roughly in balance now, but it could turn to a complete supply shortage (in case of new supply curbs)".

Iran may feel it no longer has anything to lose.

Energy shares soared as crude oil prices reached 3-1/2-year highs, with investors betting the USA withdrawal from a nuclear agreement with Iran would increase tensions in the Middle East and curtail oil supply. "They worked last time".

Crude oil prices swung wildly on Tuesday, eventually climbing back above $70 a barrel later in the day. "Now that the United States has violated that and pulled out of it, it's hard to see how we're going to get those Americans out".

The re-imposition of the sanctions comes in the wake of a tightening oil market due to strong demand, particularly in Asia, and while top exporter Saudi Arabia and number 1 producer Russian Federation are leading efforts to cut a global supply glut to spur demand and increase prices.

Vanessa Coleman

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