Oil Prices Fall from Multi-Year Highs

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"Is it really in [Iran's] interest now to sign up to a Saudi-led Russian deal to extend these cuts?"

Bank of America Merrill Lynch this week discussed the "risk of $100/bbl oil next year", saying global oil markets likely will tighten further if a new Iran deal is not reached or OPEC and Russian Federation extend production cuts into 2019.

The deal is set to expire at the end of 2018, but the Bank of America analysts said that OPEC and Russian Federation are likely to continue working together to prevent prices from falling.

Citigroup's Ed Morse expects oil prices to rise past $80/bbl in the short term as Iranian production declines, but with those higher prices creating more production growth in the USA and some other places - enough to bring crude down to the low $60s or high $50s in 2019.

Iran has, according to Politifact, largely complied with the 2015 deal. A Chinese oil company also has a deal to develop the country's massive South Pars offshore natural gas field. "Saudi will work closely with major OPEC, non-OPEC producers and with key consumers to mitigate the effects of any supply shortages".

Iran will ramp up production imminently and exclude itself from any ongoing OPEC agreement.

US light crude was down 16 cents at $71.20, having touched a 3-1/2 year high of $71.89 on Thursday.

This is United States hard power on full brutal display, with the most blatant disregard for an worldwide agreement that is backed by the most intrusive inspection regime by the global Atomic Energy Agency in history, which has certified Iranian compliance.

"An oil price increase is a hit to consumers in the form of higher gasoline prices, which means weaker spending on other items", said Gregory Daco, chief US economist at Oxford Economics.

Brent crude oil touched its highest since November 2014 at $77.20 a barrel. "Political interference will disrupt the process of development and exchange in the market". Oman and Kuwait also gave circumspect positions. Pricing imports in yuan would therefore spare China the cost of exchanging dollars, and would increase the use of the renminbi in global financial trade, which could ultimately hurt the dollar's worldwide clout.

But just how much is already baked into fuel prices today is uncertain - and risks abound. Oil prices have been rising, however, as a worldwide glut of crude is burned off by strong global demand and limits on drilling by Saudi Arabia and other major producers. The alliance they established in 2016 could dissolve into mutual rivalry and suspicion.

Instead, Saudi sources have briefed the media to say the kingdom would not act alone to increase production and intends to consult with other OPEC and non-OPEC members. "They want to preserve the deal that they worked very hard to achieve", he said, referring to the group's historic production cuts.

Contracts for Brent, the global crude benchmark, and its USA counterpart climbed more than 3 percent to highs last seen in November 2014 after Trump on Tuesday abandoned the deal and announced the "highest level" of sanctions against Iran.

Apart from praising the withdrawal, Saudi Foreign Minister Adel al-Jubeir said that the country would do "everything we (Saudi Arabia) can" to build a nuclear bomb if Iran does the same, The Hill noted.

Much depends on Russian Federation.

Saudi Arabia is also more aggressively confronting Iran on multiple fronts under the directives of King Salman's son and heir, Crown Prince Mohammed bin Salman, who has consolidated power in the kingdom.

If the latter argument prevails, President Trump's decision may in fact have finally provided OPEC and Russian Federation, which in 2016 had expected their effort to take just six months, with an exit strategy.