por admin » Mar May 08, 2018 10:44 am
Oil pares losses after NYT report that Trump told Macron US will leave Iran nuclear deal
Tom DiChristopher | @tdichristopher
Published 31 Mins Ago Updated Moments Ago
CNBC.com
Oil prices fell ahead of President Donald Trump's decision on whether to withdraw the United States from the Iran nuclear deal.
Trump is expected to announce that he will no longer suspend sanctions aimed at Iran's oil exports, a move that equates to a U.S. exit from the nuclear deal.
Some traders say Trump will leave his administration wiggle room to continue negotiating a revised nuclear deal with European allies.
President Donald Trump
Getty Images
President Donald Trump
Oil prices plunged on Tuesday following a report that President Donald Trump will not pull the United States out of the 2015 Iran nuclear deal, but it was not immediately clear if the report was accurate.
Bloomberg News reported that Trump will announce new sanctions on Iran, but would not leave the deal, citing CNN. However, that headline was not accurate. CNN actually reported that Trump would restore sanctions that have been suspended, marking the first step toward exiting the accord.
Crude futures had been down earlier in the session as the market awaited Trump's decision on the Iran nuclear deal, sliding further from the previous session's 3 ½ year highs.
Trump is expected to announce on Tuesday at 2 p.m. ET whether he will continue to waive sanctions against Iran, which were suspended as part of the 2015 nuclear deal. If he restores the sanctions, which target Iran's oil exports, it would effectively withdraw the United States from the international accord.
U.S. West Texas Intermediate crude oil was down $2.46 a barrel, or 3.5 percent at $68.27 by 11:15 a.m. ET (1515 GMT). The contract rose as high as $70.84 on Monday and ended the session about $70 a barrel for the first time since November 2014.
International benchmark Brent crude fell $2.35, or 3.1 percent, to $73.82. Brent touched $76.34 on Monday, its best level since Nov. 27, 2014.
Iran is OPEC's third-largest oil producer and currently exports about 2.5 million barrels a day. Renewed sanctions would likely crimp those shipments at a time when global oil supply and demand have essentially balanced out. That increases the risk that the market could swing into undersupply and send oil prices higher.
However, prices backed off Monday's highs after Trump tweeted that he would announce his decision four days before a deadline spelled out in the nuclear deal.
The tweet convinced some investors that the worst of the market's fears — that Trump will move quickly to impose sever sanctions — won't be realized, according to John Kilduff, founding partner at energy hedge fund Again Capital. Instead, some traders are now anticipating a "Trumpian half measure," he said.
"I think they'll pull out of the deal, but I don't think he'll go much further than that," Kilduff said. "We're pulling out of the deal, but he's going to hold off on reimposing sanctions until he can have an opportunity to work out some other sort of arrangements with Iran and the allies themselves."
The CNN report on Tuesday appeared to confirm that expectation. Sources told the network it could take months for the sanctions to take effect as the administration develops guidance for companies and banks.
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Trump warned earlier this year that he would pull out of the nuclear accord unless he could reach a deal with Britain, France and Germany to toughen the terms of the agreement. That deal has not emerged.
If Trump restores sanctions, the impact on oil flows will depend in part on how Washington chooses to implement them.
However, analysts say that lack of international support for renewed U.S. sanctions means the measures will likely only remove 300,000-500,000 barrels a day of Iranian crude from the market. That compares with 1 million-1.5 million barrels a day under President Barack Obama.
The oil market is vulnerable to a sell-off because investors have taken out a record number of long positions in crude futures in recent months. Investors could unwind these long positions, or bets that oil prices will keep rising, if Trump's announcement on Tuesday eases geopolitical concerns.
"A de-escalation of the geopolitical tension is likely to trigger an outflow from investors, reducing significantly whatever risk premium is embedded in prompt prices, given that investors are holding near-record net long positions," Edward Morse, global head of commodities research at Citi said in a recent research note.
The continued deterioration of Venezuela's economy, underpinned by a drop in its lifeblood crude oil production, has helped to underpin prices.