Oil prices hike as US quits Iran deal

Oil prices have reportedly jumped to their highest since 2014 after United States President Donald Trump announced that the US was pulling out of a nuclear deal with Iran.
Brent crude shot up 3.1 per cent to more than US$77 (K110) per barrel in London on Wednesday on the news that the White House would reimpose sanctions on Iran.
Trump said last week that he was pulling the United States out of the Iran nuclear deal, in a move set to upset America’s European allies and disrupt global oil supplies.
Papua New Guinea economist and Institute of National Affairs executive director Paul Barker said the implications of Trump’s withdrawal from the international agreement with Iran were still very uncertain.
When asked to comment what US’s withdrawal could mean for the country, Barker said: “Europe and China say they’re trying to sustain the agreement which they feel is valuable for regional and world peace, as well as economic stability, especially as there’s no alternative plan that’s even been drafted.
“However, if Trump’s sanctions are restricted to US firms trading with Iran that’s one thing, but if he pushes for sanctions also to be applied by European and other firms as well, clearly that would have more disruptive implications for the oil market, and other trade and investment.
“So, it really depends upon how far Europe, particularly, is prepared to go to stick with the current Iran deal and make a break with their ally the US on this issue, or whether some common ground can be found, which doesn’t just push the power back into the hands of the hardliners in Iran and elsewhere.
“Clearly, major disruption to trade and investment with Iran would undermine access to the major Iranian energy supply, raise uncertainty in an already-volatile region and likely push up oil price and other energy prices.
“Although, probably not by that much during the northern summer period when energy demand is relatively low, more later in the year if the issue isn’t resolved.
“That again would depend upon the response of the other major suppliers, notably Saudi and Russia, which are enjoying the benefits of partially-recovered energy prices and could respond by increasing production to make up any shortfall from Iran, rather than encourage major further investment and supply from the non-conventional producers, in north America and elsewhere.
“Russia is unlikely to want to penalise its middle-eastern partner, Iran, and China is also eager to ensure reliable energy supplies from alternative markets in the Middle East, including Iran.
“The capacity of the US to impose its will on these countries is more limited than in the past, especially as it still appears that it’s the US that’s breaking an established agreement, rather than Iran, which seems to be largely compliant, making it hard for other countries to impose penalties on the latter.”