U.S. President Trump’s “withdrawal” from Iran nuclear deal has sent shockwaves through the Iranian economy. The tension has been escalated when US Secretary of State Mike Pompeo announced a list of 12 demands of Iran on May 21, warning the “unprecedented sanctions” will be applied if Islamic Republic refuses to stop its nuclear program and regional adventurism. To protect domestic manufactures and manage the outflow of currency, Iran decided to ban the imports of 1339 items and shift to seek for domestic alternatives.
In order to counter U.S.’s bid in stemming its exports, Iran is planning to allow private companies to export crude oil to help beat U.S. sanctions. Meanwhile, Iran is urging the OPEC members to abide by the output agreement, as well as other measures to protect national oil exports.
U.S. State Department senior official reaffirmed the Trump’s goal of slashing Iran’s oil exports to zero by November on July 2. However, he said U.S. will grant waivers to help oil importers to reduce purchase “on a case-by-case basis” before the deadline.
Trump’s move had caused oil price surge for more than 3.5% in New York last week after the State Department official revealed U.S. is pushing foreign companies to completely stop buying from Iran’s oil by November 4. The announcement provoked consternation among oil waters, especially in China and India, which had regularly imported from Iran.
Iranian President Hassan Rouhani is firmly against U.S. sanctions and threatened to disrupt oil shipments from neighboring countries if he can’t see Trump’s concession. An Iranian Revolutionary Guards commander also said they would take action to hit back, including block any exports of crude for the Gulf.
However, U.S has responded that they will keep the promise to help keep oil tanker waterways in the Persian Gulf open and will “stand ready to ensure the freedom of navigation and the free flow of commerce wherever international law allows,” said by Capt. Bill Urban, the spokesman of U.S. military’s Central Command.
Hossein Kazempour Ardebili, Iran’s OPEC governor said it’s a “Self harm” move for the U.S. to use oil as the weapon. “Trump’s demand that Iranian oil should not be bought, and (his) pressures on European firms at a time when Nigeria and Libya are in crisis, when Venezuela’s oil exports have fallen due to U.S. sanctions, when Saudi’s domestic consumption has increased in summer, is nothing but self-harm.”
“At the end it is the American consumer who will pay the price for Mr. Trump’s policy,” he added.
The oil prices will surge more than previously expected in the second half of 2018, according to Morgan Stanley. The fresh sanction will reduce Iran’s oil production by 1.1 million (bpd), as a result, Morgan Stanley forecasts international benchmark Brent crude will rise to $85 a barrel over the next six months, $7.50 higher than its previous estimate.
Some industry analysts even estimated that the coming global oil shortage could send oil prices spiking to $100 a barrel or more.