what's next for oil?

Trump Pulls Plug on Iran Nuclear Deal…What’s Next for Oil?

The fears that oil prices would rocket if US President Donald Trump canned the Iran nuclear accord have proven unfounded.

Oil prices did nudge up on the news, but only around 2.5%. That limited price rise indicates Trump’s move had been widely anticipated.

At the time of writing, West Texas Intermediate crude oil is US$70.71 per barrel. Brent crude is US$76.72 per barrel.

We still expect increased drilling, especially among the US shale sector, to bring prices back below US$60 per barrel by the end of northern summer. But, in the meantime, the higher prices will be good for most oil stocks.

And US companies may be some of the biggest beneficiaries, as the nation’s nascent energy export market could boom.

As noted by Bloomberg:

A revival of U.S. oil sanctions on OPEC’s third-largest producer may set the stage for record-high U.S. crude exports by the end of this year.

Crude oil exports sharply increasing

The image below gives you a good visual of the rapid growth of US crude exports:

US crude exports

Source: Bloomberg

On pulling out of the deal, Trump stated, ‘The United States no longer makes empty threats. When I make promises, I keep them.’

Trump’s tough words — and a likely boost to the US oil sector — will play well with his supporters. But he’s also stated he remains open to renegotiating the ‘horrible one sided deal that should have never ever been made’.

While Tehran may publicly balk at the idea of renegotiating now, if US sanctions begin to bite they’ll likely change their tune. And the resulting news will put even more downward pressure on oil prices.

Bernd Struben

Bernd Struben

Bernd Struben is the lead editor at The Australian Tribune. Bernd makes use of his extensive network to bring you the top stories you need to know about each day. Stories the mainstream may miss. Or bury somewhere you’re unlikely to ever read them. Bernd studied aerospace engineering and journalism at the University of Michigan, before graduating with a degree in economics. Over the past two decades he’s worked in media, management, and finance in the US, the Caribbean, Europe, and Australia. His other role, as the editor of the Port Phillip Insider, puts him in a unique position to read Australia’s most exclusive financial advice. Some of which he shares with readers of The Australian Tribune for free.
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