Iran's oil customers in Europe might reduce imports, flag financing issue

Donald Trump Emmanuel Macron Angela Merkel

French Finance Minister Bruno Le Maire said on Europe-1 radio that Europe should not accept that the U.S.is the "world's economic policeman".

"Higher prices are more than likely to be capped as.USA shale producers turn the taps back on the longer prices remain above break-evens", said Kerry Craig, global market strategist at J.P. Morgan Asset Management. "The Foreign Minister recalled the willingness of the [French] Head of State to work collectively in a wider framework, including nuclear activity and Iran's ballistic programme as well as the solution to the crises in the Middle East".

The key issue is what impact any American retaliatory sanctions could have on Western companies, with PSA, Renault and many French and German auto suppliers beating a significant collective door to Iran during the past two years following Iran's emergence from the economic cold in 2015.

Iran ramped up its oil production by 1 million barrels per day after sanctions were lifted in early 2016.

USA bank Goldman Sachs said renewed sanctions and risks to supplies elsewhere, especially in Venezuela, meant there was a high possibility of higher prices than the bank's summer Brent price forecast of $82.50 per barrel.

"The goal of the wind-down provisions - for example, in the case of oil purchases from Iran, if it's a long-term requirements contract, for example - what we're saying is that although the sanctions come back into effect immediately, precluding any new contracts, for those affected by our jurisdiction, they've got six months to phase it out", said John Bolton, Trump's national security adviser, in a briefing with reporters.

"It is not yet clear which concrete sanctions the US will impose".

France's Total, Anglo-Dutch Royal Dutch Shell and Italy's Eni were more active in Iran than USA companies, which were still limited by other sanctions unrelated to Iran's nuclear program, including a trade embargo. "Boeing played it safe and did neither, which may have been smart", said Richard Aboulafia, an analyst with airline-industry consultant Teal Group near Washington, D.C. He also said that Iran's demand for new planes was vastly overrated all along.

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Chinese entities could also act as intermediaries for European companies that want to continue trading. Aside from the mounting military tensions between Iran and Israel, oil prices are rising on the uncertainty.

The threat of new sanctions come amid an oil market that has already been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and top producer Russian Federation have led efforts since 2017 to withhold oil supplies to prop up prices.

Mnuchin told reporters that the Trump administration has talked to "various parties" who would be willing to provide enough oil to offset Iran.

US light crude CLc1 was down 10 cents at $71.26, having touched a 3-1/2 year high of $71.89 on Thursday.

"We are closely monitoring developments following (the) USA administration decision ... and will assess our position and commercial arrangements accordingly", Hellenic said.

Conversely, the end of the deal hurts Iran. The Iran deal allowed the regime to continue enriching uranium, albeit slowly.

"European companies are more exposed to the U.S. market, they must comply not to get into trouble". More significantly, the deal failed to prevent Iran from developing ballistic missiles. PSA Peugeot Citroen, for example, sold more than 3.6 million vehicles worldwide a year ago.

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