FxWirePro: Oil price likely to spike if Trump refuses to sign waiver on Iran sanctions

The oil bears face a major risk of a bullish spike in prices if the United States refuse to recertify Iran’s nuclear agreement. In 2015, Iran signed the Joint Comprehensive Plan of Action (JCPOA), better known as Iran nuclear agreement with the United States and other five world powers; Russia, China, Germany, France and the United Kingdom. However, President Trump repeatedly called the nuclear agreement as one of the worst deals ever made and in October refused to recertify Iran’s compliance with the agreement. Trump needs to decide by mid-January whether to prolong the waivers on American sanctions against Iran’s oil exports under the nuclear deal or not.  And if he fails to sign the waivers, which needed to be extended every 120 days, the restrictions on Iran will be automatically re-imposed.

In such a scenario, Iran’s oil exports could once again face sanctions and might not be readily available to the global markets. Iran is currently producing around 3.8 million barrels of oil per day and exports more than 2.3 million barrels per day. In the current situation, where global oil inventories have been steadily declining since last year, such a move will lead to sharp increase in prices.  

WTI is currently trading at $61.9 per barrel and Brent at $67.8 per barrel.