Oil prices soar as USA exits Iran nuclear deal

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U.S. President Donald Trump's declaration that the United States is pulling out of its nuclear agreement with Iran is feared to cause confusion and intensify conflicts in the Middle East.

Market also continue to weigh a steady increase in USA production levels as the rise in US drilling marked one of the few factors pressing back crude/fuel prices.

Brent crude, the standard for pricing global oil, rose $2.11, or 2.8 percent, to $76.96 a barrel in London.

The US president's decision to ignore European pleas to save the Iran nuclear deal is the latest humiliation after his threats to impose trade tariffs, his pull-out from the Paris climate pact, and his demands for North Atlantic Treaty Organisation allies to pay more.

The re-imposition of the sanctions comes in the wake of a tightening oil market due to strong demand, particularly in Asia, and while top exporter Saudi Arabia and number 1 producer Russian Federation are leading efforts to cut a global supply glut to spur demand and increase prices.

"Should the governments decide to comply with USA demands, the refineries - as was seen in Europe and Japan - will have to make the necessary adjustments to process crude from other countries", Emadi said.

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

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Brent crude futures, the global benchmark for oil prices, hit their strongest since November 2014, at US$77.89 a barrel shortly before 7am GMT yesterday, up 0.9 per cent from their last close. That is a shift from its recent rhetoric that it wanted to see higher oil prices to induce more investment in future oil supply to avoid markets becoming too tight (not to mention its own budget needs and planned public listing of state oil company Saudi Aramco).

William Peek, deputy US assistant secretary for the bureau of Near Eastern Affairs at the State Department, denied the pressure campaign aimed to force regime change in Iran.

Peek acknowledged there are some "diplomatically tactical disagreements" with Europeans, but said those differences could be overcome.

Trump pulled the US out of the 2015 accord on Tuesday. They will grumble and accept it. Production is already down to about 1.4-1.5 million barrels per day, or about 600,000-700,000 bpd lower than 2016 levels. "As before, it may take several rounds of reductions to reach target levels", FGE's founder and chairman Fereidun Fesharaki wrote in a note. However, there were signs that other members of the Organization of the Petroleum Exporting Countries (OPEC) will raise output to counter the Iran disruption.

Saudi Arabia is ready to offset any supply shortage but it will not act alone to fill the gap, an OPEC source familiar with the kingdom's oil thinking said on Wednesday.

The spokeswoman said May had told Trump that Britain and its European partners remained "firmly committed" to ensuring the deal was upheld as the best way to prevent Iran from developing a nuclear weapon.

"For the first time, Iran has the chance to show the world they are not the rogue nation they are always presented as, that they negotiated in good faith and keep to their commitments", said Karim Emile Bitar of the Institute for worldwide and Strategic Studies in Paris. With U.S. congressional midterm elections looming in November, there seems to be a strong aspect of Trump's attempt to appeal to his supporters by rejecting a foreign policy achievement of the administration of his predecessor, former President Barack Obama. CEO Dennis Muilenburg said last month that losing the Iranian sales wouldn't slow down production. The agency has raised its forecasts every month since last August.