Iran Deal Exit To Boost Oil Prices: 5 Top-Ranked Picks
Zacks Investment Research | May 07, 2018 09:29PM ET
On Monday, President Donald Trump tweeted that he would be announcing his decision on the Iran nuclear deal at 2:00 pm on Tuesday. The price of U.S. crude had soared above the $70-mark before his announcement on speculation that Trump would take a tough position on Iran. Early on Tuesday, prices declined marginally from their highest level since 2014 on profit taking.
Trump continued to criticize the nuclear deal on Monday and it is widely believed that renewed sanctions on Iran will lead to a significant shortage in supplies. Another factor boosting oil prices is the intensifying economic crisis in Venezuela, which is endangering both production and exports. Adding oil stocks to your portfolios at this time looks like a smart option.
Trump Thinks Deal is “Badly Negotiated”
Trump has been critical of the deal for a long time now and renegotiating the terms of the agreement was one of his key campaign pledges. In 2017, Trump declined to certify the deal to Congress. Later, in January this year he waived sanctions but warned that this was unlikely to happen again unless the terms of the deal were made tougher.
Meanwhile, repeated negotiations will the United States’ European partners have failed to yield results ahead of a May 12 deadline. Trump and hawkish foreign policymakers believe that the deal with Iran is flawed since it fails to rein in the country’s ballistic missile program, its role in regional tensions and its backing for terrorist organizations designated by the United States.
Fresh Sanctions to Impede Oil Supplies
On Monday, WTI crude moved above $70 per barrel for the first time since Nov 2014 before moving marginally lower on Tuesday following profit taking. Impending sanctions against Iran have helped to boost oil prices in recent weeks. Analysts believe that such measures would deprive global oil markets of around 350,000 to 500,000 barrels of Iranian crude oil.
And this could be just the beginning of a supply shortage which could raise global prices by nearly $7 per barrel, per a report from The Goldman Sachs Group, Inc. (NYSE:GS) . Currently, Iran’s oil exports stand at 2.6 million barrels per day. Further, long term sanctions could harm major oil projects.
In July 2017, TOTAL S.A. (NYSE:TOT) inked a 20-year deal with the National Iranian Oil Co., which would commence with a $2 billion project. The end of the nuclear deal would mean that the United States would require oil companies across the world to reduce their purchases from Iran. Total, which has U.S. interests, is unlikely to violate U.S. sanctions.
Our Choices
Most market watchers believe that Trump is likely to exit the Iran nuclear deal on Tuesday or at least take a tougher stance on the issue. This would imperil oil supplies from Iran at a time when Venezuela’s declining oil production is likely to undergo further reductions.
OPEC and Russia’s production controls agreement has already boosted oil prices substantially this year. If the United States decides to re-impose sanctions on Iran, oil prices are likely to get a further boost. Investing in stocks of oil companies looks like a smart option at this point. However, picking winning stocks may be difficult.
This is where our Original post
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.