Price of crude oil surpassed the $77 per barrel mark for the first time since 2014 following the decision of United States president Donald Trump to pull out of the Iran deal and the looming fear of re-imposition of financial and economic sanctions against Iran.
The market is however, still trying to assess the exact impact the event would have on the 2.5 million barrels per day (bpd) of export oil of Iran.
There is however wide difference in opinion about the possible amount of oil that would go out of the supply chain.
Theer are some who are predicting that as much as 1 million bpd would be impacted by the event even though any possibility of re-imposition of U.S. sanctions is still six months away. There are however others who are confident that the impact would could be as low as 200,000 bpd because the impact would be cushioned by the European powers choosing to remain in the deal.
The reluctance of international banks of financing trades would be the first and immediate impact from the threat of the so-called secondary sanctions on non-U.S. companies. That can result in the cutting off of the world's largest independent commodity traders from Iran and would affect the country because they have been instrumental in aiding the country in raising its exports follwoigin the 2015 nuclear deal.
"This will largely shut down trade with Iran for those who got back in early," said one executive at a major commodity trading house. "There may eventually be some wiggle room carved out between the Europeans and the Americans, but for now it will quickly become a no-go area, especially for banks who have financed the trades."
And the signs are already evident. A major oil company decided to stop its search for an Iranian tanker to move crude after Trump’s decision, a London-based shipbroker was quoted by the media as saying.
"Everyone knows there is this 180-day grace period, but people are already starting to change behaviour because they just don't want to take the risk," the shipbroker said. it is unlikely that risks of handling such trades would be taken by banks and insurers despite the possibility that the European governments would still be backing the deal minus the U.S.
The manner in which the other countries react would determine the fallout of the decioisn taken by Trump, said Richard Nephew, of Columbia University's Centre on Global Energy Policy. He had previously worked on the sanctions that were imposed on Iran by the Obama administration.
"Now we have the million-dollar question of what kind of co-operation we are going to get from the rest of the world's companies," Nephew said. "Companies are going to be exploring their options."
(Source:www.afr.com)
The market is however, still trying to assess the exact impact the event would have on the 2.5 million barrels per day (bpd) of export oil of Iran.
There is however wide difference in opinion about the possible amount of oil that would go out of the supply chain.
Theer are some who are predicting that as much as 1 million bpd would be impacted by the event even though any possibility of re-imposition of U.S. sanctions is still six months away. There are however others who are confident that the impact would could be as low as 200,000 bpd because the impact would be cushioned by the European powers choosing to remain in the deal.
The reluctance of international banks of financing trades would be the first and immediate impact from the threat of the so-called secondary sanctions on non-U.S. companies. That can result in the cutting off of the world's largest independent commodity traders from Iran and would affect the country because they have been instrumental in aiding the country in raising its exports follwoigin the 2015 nuclear deal.
"This will largely shut down trade with Iran for those who got back in early," said one executive at a major commodity trading house. "There may eventually be some wiggle room carved out between the Europeans and the Americans, but for now it will quickly become a no-go area, especially for banks who have financed the trades."
And the signs are already evident. A major oil company decided to stop its search for an Iranian tanker to move crude after Trump’s decision, a London-based shipbroker was quoted by the media as saying.
"Everyone knows there is this 180-day grace period, but people are already starting to change behaviour because they just don't want to take the risk," the shipbroker said. it is unlikely that risks of handling such trades would be taken by banks and insurers despite the possibility that the European governments would still be backing the deal minus the U.S.
The manner in which the other countries react would determine the fallout of the decioisn taken by Trump, said Richard Nephew, of Columbia University's Centre on Global Energy Policy. He had previously worked on the sanctions that were imposed on Iran by the Obama administration.
"Now we have the million-dollar question of what kind of co-operation we are going to get from the rest of the world's companies," Nephew said. "Companies are going to be exploring their options."
(Source:www.afr.com)
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