Oil hits 3 year high after USA quits Iran deal

Oil price rises

Oil price rises

USA investment bank Jefferies said in a note it expects Iranian crude oil exports to start falling in the next few months.

The investment bank's current forecast is for Brent crude to hit $82.50 a barrel by the summer; it is now trading around $77 a barrel.

US West Texas Intermediate crude futures were up 42c at $71.56 a barrel.

Still, British Prime Minister Theresa May on Friday reiterated her support for the Iran nuclear deal and agreed with Trump that talks were needed to established how USA sanctions would affect companies operating in Iran.

"While oil prices have scope to venture higher in the near term on geopolitics, robust production from US Shale has the ability to limit gains down the road", Otunaga said. "Overall the market still looks poised for higher levels".

Two current and one former US official said America's intelligence agencies were not being pressured to provide evidence to support the White House's policy but instead were being ignored. With him, in order from left to right, are Iran's Ambassador to the IAEA Ali Akbar Salehi (second from left) and Russian Foreign Minister Sergei Lavrov, British Foreign Secretary Philip Hammond and U.S. Secretary of State John Kerry.

At recent decline rates, crude production in Venezuela will decline to around 1.0 million barrels a day by the end of this year, the financial group said. The bank also lifted its average Brent forecast to $70 for this year and $75 in 2019.

Since the sanctions were lifted in 2015, Iran ramped up its crude oil production and expanded production capacities from 1 million barrels per day (mbpd) to nearly 3.8 mbpd by March 2018.

Analysts had little hope that opposition to the United States action would prevent sanctions from going ahead.

European allies have said they remain committed to maintaining the nuclear deal, with German Chancellor Merkel reiterating her support of the accord Thursday.

China has further incentive to establish an interest in Iran's oil industry, as the country lies at the crossroads of China's "One Belt, One Road" project, which aims to invest more than $1 trillion in infrastructure from railroads and ports to energy, in more than 60 countries spanning Europe, Africa and Asia. They will grumble and accept it.

Oman, which orchestrated secret U.S. -Iran contacts that helped pave the way for the deal in 2015, was more measured. "As before, it may take several rounds of reductions to reach target levels", FGE's founder and chairman Fereidun Fesharaki wrote in a note.

DNB Bank chief oil analyst Torbjørn Kjus noted that the sharp language Mr Trump used in delivering his speech on the Iran deal signalled that "sanctions will be tough" on those not adhering to demands of significant cuts in crude imports from Iran.

The Organization of the Petroleum Exporting Countries, however, is in no hurry to decide whether to pump more oil to make up for an expected drop in exports from Iran, four sources familiar with the issue said, saying any loss in supply would take time. "It's overwhelming nearly all the other sectors in terms of its impact on today's market action", said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

"Yet since Trump threatened to rip it up, predictions that the Middle East will once again be bogged down in crisis have emerged: Tehran may restart its nuclear enrichment program and its archrival Saudi Arabia would likely develop nuclear weapons too". US output is creeping closer to that of top producer Russian Federation, which pumps about 11 million bpd.

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