Oil Is Bound To Soar As Iran Sanctions Become A Reality

Oil Is Bound To Soar As Iran Sanctions Become A Reality

The price of crude oil has been soaring as a direct result of Trump’s decision to pull out of the nuclear deal with Iran. Unless American companies can increase their production to meet the demand, prices are said to increase further as the United States starts imposing sanctions on Iran.

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On Tuesday President Donald Trump made the decision to leave the Iran nuclear deal, and as sanctions against the country are being outlined, the price of oil is soaring. On Wednesday the price of crude oil spiked by 3 percent, on Thursday the increase continued, and the price is now set to increase further over the weekend.

The American administration has been very clear about their intention to implement strict sanctions on Iran meaning one of the largest oil exporters in the world will be cut off from the American market. Naturally, this would lead to the price of oil increasing further while other producers scramble to meet the increasing demand.

Who Will Take Over the Oil Production After Iran?

The abandoning of the nuclear accord has indeed created a complicated situation and considering that Iran produces nearly 3 million barrels of oil a day, no single producer will be able to fill the gap. And since the United States just set a new record with their own production, the long-term solution will most likely be to import oil from several sources.

If a long-term solution isn’t found, the price of crude oil has no ceiling. In fact, Bank of America released a statement the other day saying that the price of crude could easily reach $100 by this time next year, and other predictions agree. Naturally, a 40% increase in the price of oil would be devastating for most industries but especially the transport sector.

That being said, Exxon has shown an interest in increasing their production and the company stock has been soaring for the past week. If Exxon steps up their production, we can expect to see the stock increase in correlation with the oil price, but Exxon isn’t alone. On Wednesday, energy stocks were the best performers on the S&P 500, and the energy sector is already up 12 percent in the current quarter. 

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