US pulls out of Iran nuclear deal

President Trump has announced the US’s withdrawal from the Iran nuclear accord and is to reinstate all sanctions currently waived under the Joint Comprehensive Plan of Action (JCPOA) originally agreed by the US, UK, France, China, Russia and Germany in 2015. Under the accord, Iran agreed to limit its nuclear activities and allow international inspectors access to facilities in return for the lifting of crippling economic sanctions that had been put in place amidst fears the country was developing nuclear weapons capabilities.

Market analysts, including S&P Global Platts, believe the US withdrawal places some 200,000 b/d of Iranian crude exports at risk, although US shale production or Saudi spare capacity are well placed to mitigate any supply shortages. Following the announcement, the price of Brent crude rose 3% to $77.15/b, the highest since November 2014.

Commenting on the news, Jack Allardyce, Oil & Gas Research analyst at Cantor Fitzgerald Europe, said: ‘In our view, the resumption of sanctions would drive a short-term increase in benchmarks, potentially towards $80/b depending on the scope and timing. However, while the 200,000–300,000 b/d that would likely be impacted is fairly significant, the run-up [to the announcement] suggests the market is already pricing this in to an extent.’

Tom Cummins, Partner at law firm Ashurst, added: ‘The spotlight now turns to Iran and the other participants in the nuclear deal – principally in Europe – to see how they react. European countries along with Russia and China have made it clear that they want to preserve the deal, but there is a practical question as to whether European companies engaging with Iran can do so in light of any reinstated US sanctions.’

Indeed, media reports have already suggested that the sale of BP’s North Sea Rhum gas field to Iranian oil company Serica Energy as part of a £300mn deal has been cast in shadow as a result of the US withdrawal from the nuclear accord.