NY futures slid as much as 1.3 percent, with U.S. President Donald Trump set to make a call on whether he'll pull out of a 2015 deal between Iran and world powers that had eased sanctions on the producer in return for curbs on its nuclear program.
Widespread expectations that President Donald Trump will withdraw the United States from the Iranian nuclear pact also weighed on crude prices. The exact impact of renewed sanctions is hard to determine. Both contracts continued to pare losses in post trade.
"We will continue to monitor the situation including the response of the Iranian authorities and the other JCPOA members", it said. But the European Union joined the USA with its own import restrictions, something analysts do not expect this time.
Analysts at RBC Capital Markets said Iran's exports could be cut by 200,000 to 300,000 bpd as a result. But some analysts see the move eventually disrupting as much as 1 million b/d of oil supply.
Meanwhile, global oil demand remains strong despite a lackluster start to the year for Europe and the U.S. Solid activity in China and resilient momentum across most of Asia have maintained global demand for oil.
"But compliance with unilateral U.S. sanctions would be much more hard to enforce than the multilateral measures implemented in 2012", said Paul Sheldon, Platts Analytics associate director.
The sanctions "effectively" go into place immediately, U.S. Treasury Secretary Steven Mnuchin said after Trump announced the withdrawal. The 2015 agreement required Iran to curb its nuclear enrichment program in exchange for relief from global sanctions.
What's more, CNBC reported recently, that the effect of US sanctions against Iran on the country's global shipments of crude will also be limited: China and India are unlikely to reduce their intake of Iranian crude as are other buyers, who were previously on the U.S.' side with regard to the sanctions.
According to the Automobile Association, the oil price is linked to global petroleum prices (though not always directly), and as things now stand, South Africans are nearly definitely going to see a petrol price increase in June - the question is by how much.
Several US military officials told CNN that there are increasing concerns Iran is on the cusp of an attack against Israel. That would boost oil prices anywhere from $3.50 to $7 per barrel above their current trajectory, the analysts said.
Iran is OPEC's third-largest producer with an output of about 3.8m barrels per day, making up around 4% of global oil supply. When the European Union agreed in 2012 to sanctions on Iranian oil, about 1.1 Mbd was eventually taken off the market. "Wages aren't accelerating as rapidly as we would like, but we are hearing a lot of anecdotal reports of wages picking up and that should help". It aims to increase production to 1 Bcm/d by March 2019. 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 OPEC and Russian Federation as well as instability in Venezuela.
The gas will supply the Iranian domestic market starting in 2021.
Several companies, including Airbus, Boeing and Total, that have struck business deals in Iran and could be looking for exemptions from US sanctions, finished slightly lower.
The Middle East is now the dominant global exporter of polyethylene. Of course, we know that oil prices, as many commodities, tend to overshoot on the upside and downside due to investor positioning. In the past, sanctions had curbed Iranian oil exports significantly. Iran's exports dropped, and so did its output, until a 2015 deal with world powers that placed limits on its nuclear program.
Trump's decision came as no surprise as he has always been against the Iran deal.
Iran's steel and metals sector is expected to turn more to Chinese technology if new United States measures restrict this European investment.