USA pressure to decrease Iranian oil purchases puts South Korea in an especially tricky position while it is trying to convey to North Korea that it is serious about committing to a denuclearization deal.
Oil ministers from Saudi Arabia and Kuwait said their countries will work closely with major OPEC and non-OPEC producers to lessen the impact of any supply shortages after USA withdrawal from the Iran nuclear deal. Hours before Trump's announcement, federal government forecasters raised their estimate for 2018 oil prices by 10.5% to an average of $65.58 a barrel.
"China is Iran's biggest customer, said Carl Weinberg, chief economist at High frequency Economics in a note to clients".
Of the 1 mb/d of Iranian supply knocked offline before sanctions were lifted in 2016, "n$3 early half of this total was due to a complete European Union import ban".
Niels Christensen: Well, of course, all the other oil exporting countries, I would imagine, would be very pleased to see higher oil prices, in a way also the US. On Wednesday, as tensions over President Trump's withdrawal from the Iran nuclear deal increased, Brent saw its price rise 3%.
India, the second largest importer of Iranian oil, is unlikely to be immediately affected by USA sanctions.
The EIA on Tuesday raised its forecast for United States output in its monthly report to 12 million bpd late next year.
Crude oil production, meanwhile, has tightened as a global oil glut prompted a slowdown in drilling by Saudi Arabia and other major producers. New sanctions will further consolidate Iran's oil customers into those less likely to pressure Iran for denuclearization or regime change, and will weaken the bargaining position of USA allies in further negotiations with Iran. Goldman said it is possible that Iran loses 500,000 bpd by the end of the year, which would push up oil prices by more than $6 per barrel. Riyadh lost no time in assuring the market on Tuesday that it would compensate for any fall in Iranian supply.
"The three or four-year period of quiet in terms of geopolitics impacting oil markets is over", said Canary's Eberhart. By his projection, that is likely to happen only when Brent oil advances to the US$80s. "The President's hawkish language has the potential to aggravate tensions in the Middle East further, potentially putting additional upward pressure on crude oil prices", the Japanese firm said.
Saudi Arabia, on the other hand, could. "There is no one who will realistically choose Iran over the U.S.", said energy consultancy FGE.
Unlike 2012, the United States is entering these sanctions alone, and this means that it has less control over their efficacy. And, worryingly, Bloomberg Economics has ranked SA as the most vulnerable country to Iran sanctions.
Trump telegraphed the move, and oil prices shot up in recent weeks as traders anticipated it.