London, 16 Oct – Donald Trump’s decertification of the Iranian Regime as compliant in the 2015 nuclear deal and the potential for new sanctions against the Middle Eastern country caused oil prices to rise dramatically on Monday.
The international benchmark for oil prices was valued at $57.82 at 01.56 GMT on Monday, October 16, up 65 cents, or 1.1 percent, from the previous close.
Many traders are concerned because they do not know which sanctions will be levied against Iran in the coming weeks by the US Congress and if sanctions are imposed, there may be an oil shortage which would lead to a much sharper price increase.
Under previous sanctions, over 1 million barrels per day (bpd) of crude oil supplies were removed from the global market.
Experts have, however, said that they do not believe that sanctions imposed now would have such a large effect as, at least initially, the US would be working alone.
Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers, said: “If Iran (were) found breaching their nuclear agreement and had their trade agreement revoked, (that) would be the biggest catalyst for upward momentum on crude prices.”
Of course, it should be noted that the Iranian Regime is not compliant with the nuclear deal and pose a great threat to the Middle East. That is much more important than a rise in the price of oil.
Under US law, the president must certify Iran’s compliance with the nuclear deal every 90 days and, following Trump’s decision on Friday, Congress has 60 days to decide whether or not to reimpose economic sanctions on Iran.
So far in 2017, Trump had certified Iran as compliant twice despite clear evidence against.
Other factors in the rising cost of oil included conflict in Iraq, the second biggest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) behind Saudi Arabia.
On Sunday, Iraqi and Iranian forces headed to the oil-rich city of Kirkuk in order to suppress the Kurdish forces there, in what some see as a message to the US who support the Kurds fight for independence.
Greg McKenna, chief market strategist at futures brokerage AxiTrader said that “Trump’s reopening of the Iran nuclear issue, (and) the ongoing threat of the Kurdish pipeline being cut off [were the main factors pushing up oil prices].”
A third factor in the oil price rise is the drop in the number of US oil rigs that were actively drilling for oil. Five oil rigs were cut last week bring the total of US rigs to 743, the lowest since June.