Gulf States Among Few Supporters of Trump's Withdrawal From Iran Deal

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Although, major oil producers are now party to a deal - expiring at the end of the year - to cut their output in order to maintain prices, it is likely that oil levels will remain steady.

President Donald Trump put Iran back in the penalty box on Tuesday - but the impact on the oil market could be determined by how China responds.

Rising oil prices just passed another milestone.

After the American President, Donald Trump, chose to withdraw from the nuclear pact with Iran, Israel and Iran's conflict have helped oil price to extend gains above $71 a barrel level.

Blanch forecast a demand growth of 1.5 million barrels per day in 2018 and revised his 2019 forecast up by 100,000 to 1.4 million in 2019.

To pressure allies, the USA intends to apply "secondary sanctions" on non-American firms that do business with Iran.

USA officials in announcing the renewed sanctions said they expected us allies in the oil-rich Persian Gulf region to make up Iran's shortfall in production, in a move they said would soften the impact of the sanctions on global oil prices.

"We are trying to avoid at all costs direct military action with Iran, but Iran's behavior such as this can not continue. They are very strong sanctions", Mnuchin said.

Iranian oil exports have increased by roughly 1 million barrels per day since early 2016, and the big question is whether the market will be able to cope with a sharp drop in supply if sanctions are reimposed. The global benchmark crude traded at a $6.44 premium to July WTI. And there is no guarantee that Iran's major customers will comply with new sanctions.

Washington has given European firms doing business in Iran up to six months to wind up investments or risk United States sanctions and they are also forbidden from signing any new contracts with Iran.

At least some of that oil will now be pulled from the market at a time when oil prices are already rising because of production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation as well as instability in Venezuela, CNN Money reported.

The key for the energy market will be whether Trump takes aggressive action to prevent Iran from shipping oil overseas.

Kuwaiti oil minister Bakhit al-Rashidi said his country will work with OPEC and non-OPEC oil producers to limit impact of any possible shortage in supplies, state news agency KUNA reported.