China's petro-yuan to gain leverage over Iran sanctions

Daniel Fowler
May 15, 2018

The Organization of the Petroleum Exporting Countries is in the midst of an oil supply-cutting deal with non-OPEC producers such as Russian Federation that has helped erase a global glut and boosted oil prices above $75, the highest since 2014.

"We urge the United States to ensure that the structures of the JCPOA can remain intact, and to avoid taking action which obstructs its full implementation by all other parties to the deal", a statement provided by British Prime Minister Theresa May's office said.

European oil companies are not ruling out reducing Iranian oil imports after the threat of new USA sanctions, with some expecting banking issues to hinder trade, but there was no rush to immediately cut volumes.

Let me take you down (no, I'm not going to Strawberry Fields) back to early 2016, when the United States and the European Union chose to lift financial and oil sanctions on Iran.

A second OPEC source said that, while the need to add extra supply was being considered, the safest thing for the group to do for now was to sit tight and monitor the situation.

Oil prices rose more than 3 per cent on Wednesday to 3-1/2 year highs, after U.S. President Trump abandoned a nuclear deal with Iran and announced the "highest level" of sanctions against the OPEC member.

Iran is one of the world's largest oil producers, and the export of oil and gas is worth billions of dollars each year. Sales to Europe are seen by analysts as the more likely to be reduced by the sanctions. Iran produces about 4% of the world's oil. The Farzad field was discovered by the Oil and Natural Gas Corporation but the award of its development rights has been delayed for years, first due to sanctions and then due to the differences on rate of return on investment between Indian and Iranian sides.

“We believe the previous 1 million bpd limit for exports (imposed during previous sanctions) will be reimposed.

South Korea Unification minister vouches for denuclearization
The U.S. and North and South Korean governments are preparing for a historic meeting to address North Korea's denuclearization. But she warned that the next few weeks will be critical, "requiring airtight coordination between" the two countries.

Oil ministers from OPEC and its partners meet on June 22-23 in Vienna to review the existing agreement.

French Foreign Minister Jean-Yves Le Drian also toughened the government's tone in an interview with Le Parisien. "We see the main impact on the oil price through the market mood - geopolitical noise and escalation fears".

"It is too early to say whether the rally will continue".

"While there are other imponderables like Saudi Arabia trying to increase crude output along with major OPEC (Organisation of Petroleum Exporting Countries) producers and the USA allies like France not being on board, the global economy does face bouts of uncertainty and volatility".

Saudi Arabian officials have claimed they will help stabilize the global oil market, and America may be the only nation removing itself from the Iran deal.

OPEC kingpin Saudi Arabia indicated it was ready to act.

"Saudi will remain reactive and not pre-empt forward fundamentals".

"China is the largest commodity producer in the world and the largest commodity consumer in the world, so it would make sense that Chinese futures that are close to the areas of supply and demand would be a more natural benchmark than the United States markets", said Marwan Younes, founder and chief investment officer of Massar Capital Management in NY.

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