As the US Administration of President Donald J. Trump mulls new sanctions against Iran, world oil prices remained high on May 4.

“Iran is exactly the reason we’re getting this at the moment,” Justin Urquhart Stewart, director at Seven Investment Management in London, told New Europe by phone on May 4. “There was a frisson of fear earlier in the week after some of Trump’s comments with regards to the agreement, and I think you can put that directly down to Iran and, therefore, that decision can be linked to it,” he added.

Brent crude oil was up 30 cents at $73.92 a barrel on May 4, according to Reuters. The benchmark contract hit a 3-1/2 year closing high of $75.17 on April 30. US light crude was 30 cents higher at $68.73.

“It’s the big elephant in the room,” Alexei Kokin, a senior oil and gas analyst at UralSib Financial Corp in Moscow, told New Europe by phone on May 4, adding that the Iran factor has been supporting prices for weeks. “Basically everything we’ve seen maybe in the past months has been very much due to the Iran risk and, possibly, the Venezuela risk as well.”

If Trump pulls out of the Iran nuclear deal and refrains from extending sanctions relief for the oil-producing Islamic Republic, then oil prices could rise sharply, Urquhart Stewart said. Trump has warned that unless the “terrible flaws” in the nuclear agreement are rectified by May 12, he will refuse to extend US sanctions relief.

“I think you could easily see a sharp spike of market uncertainty. It doesn’t mean it would sustain that but you could see a spike of potentially another 20 dollars if people suddenly thought there was actually going to be that sort of disruption,” the London-based expert told New Europe. “It wouldn’t be sustainable because it would be a nervous reaction to it rather than people necessarily looking at the amount of supply that’s there. The supply is fine for the time being at least,” Urquhart Stewart added.

He noted that US shale oil companies would be coming back to production thanks to a rise in crude prices. “At these prices it’s going to come back, and that’s why that price probably isn’t going to be sustainable because a lot of marginal areas then suddenly come back into play and you will see more capacity coming through…then the price goes down,” Urquhart Stewart said. “But a combination of political fear and because of what’s happening with Iran would give you that short-term spike. But it doesn’t necessarily have to be sustained.”

Sanctions on Iran’s oil industry between 2012 and 2015 cut the Islamic Republic’s oil exports by more than 1 million barrels a day, but Tehran resumed its role as a major oil exporter once the sanctions were eased.

According to Kokin, major oil producer Russia is benefiting from the high oil prices. “It’s not helping that much in the sense that the ruble is relatively weak for this price level in oil and gas. But, definitely, Russia is benefiting. If Iran’s production goes down gradually as a result of the sanctions being reintroduced, then I suppose Russia will be able to fill in that void,” Kokin said.

Iran’s Foreign Minister Mohammad Javad Zarif said on May 3 that Washington’s demand to change the landmark 2015 nuclear agreement with world powers were unacceptable. “Iran will not renegotiate what was agreed to years ago and has been implemented,” Zarif said in a video message posted on YouTube, cited by Reuters.

The European Union, through the bloc’s High Representative of the Union for Foreign Affairs and Security Policy Federica Mogherini, Britain, France, Germany, and much of the US’ intelligence community continue to support the accord, as does French President Emmanuel Macron, who urged Trump to preserve the Iran nuclear deal during a recent visit to Washington DC.

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