Oil prices were lower today as traders continued to respond to President Donald Trump’s softer line on sanctions against Iran.
, the benchmark used in many international contracts, lost 0.28% in morning trading in London to $70.45 a barrel, while was 0.56% lower at $60.33 a barrel.
Other factors weighing on the oil price were increased shale oil production in the United States, trade tension between the US and China, fears of a marked slowdown in global growth and movements in the, the currency in which oil is priced.
Iranian nuclear deal repudiated
Just weeks ago, there was talk of oil hitting $100 a barrel, but the trend over the past month has been downwards. Brent stood at $85 on 9 October, while WTI traded at $74.96. But this in turn reversed what had been a pattern of rises – on 9 August, Brent cost $72.07 and WTI $66.81.
Looking at the picture for the last 12 months, and oil can be seen to have hung on to some gains. On 9 November last year, Brent stood at $63.93 and WTI at $57.17.
The immediate cause of oil-price weakening was the back-pedalling by President Trump on Iranian sanctions. His repudiation of the nuclear deal with Tehran has split the US from its European allies and raised the prospect of the European Union setting up a parallel payments system allowing Europe to continue buying Iranian oil without going through the US banking system.
It has been said that two-thirds of world trade is dollar-denominated and 99% of that trade clears through New York. Even if an exaggeration, this gives some idea of the sway that American policymakers have over business conducted between parties who may have no connection with the US.
This “long arm” doctrine has aroused resentment in the past, and suggestions of an EU-only payment mechanism may be seen by some as long overdue.
A “noble vision”
But Mr Trump has issued a waiver to eight countries – Greece, Italy, South Korea, Taiwan, Turkey, China, Japan and India – allowing them to continue importing Iranian oil for a limited period without falling foul of America sanctions.
Meanwhile, the clock is ticking on the “declaration of co-operation” between the 15-nation energy cartel the Organisation of Petroleum Exporting Countries (OPEC) and the 11-stronmg so-called NOPEC group of oil producers sympathetic to OPEC’s objectives. This includes Russia, Oman and Mexico.
The declaration, agreed in November 2017, has provided a framework for production controls in order to support the price. But it is due to expire at the end of this year and, so far, there has been no announcement as to what will replace it.
On 17 October, OPEC secretary general Mohammad Sanusi Barkindo said: “The impact of the declaration of co-operation has exceeded all expectations. The partnership has evolved from a noble vision to a transformative force for good, a permanent feature of our energy landscape.”