Oil prices have declined over the past few days.
There are two reasons for the decline in oil prices. Both are related to President Trump’s withdrawal from the 2015 Iran nuclear deal. That accord was intended to limit Iran’s nuclear program.
First, it had been assumed that sanctions imposed on Iran would result in a decline in oil available on the market. It was thought that U.S. shale producers would be unable to make up the oil production shortfall. However, that assumption has now been called into question. The UAE announced that OPEC has spare production that could easily replace Iranian production. This according to UAE Energy Minister Suhail Al Mazrouei. “Don’t worry about supply,” Al Mazrouei said. “I don’t think there will be issues as a result of sanctions.” OPEC “can find a solution” to offset the impact US sanctions would have on supply. “That’s not what we’re concerned about. What we’re concerned about in the next meeting is, ‘what’s the right level of inventories that we should see’ and ‘can we put this group together for longer?”’
And the second reason for the decline in oil prices is that Iran has already indicated a willingness to revisit the nuclear accord that President Trump has found objectionable. Therefore, it is possible that sanctions can be avoided.
Iran’s Foreign Minister Javad Zarif met with Wang Yi in Beijing, at China’s invitation. This was Zarif’s first stop on a diplomatic tour after President Donald Trump withdrew from the 2015 deal. This came after President Trump threatened to reimpose the “highest level” of financial sanctions on Iran. In addition, Zarif is scheduled to meet the British, French and German foreign ministers on May 15 in Brussels.
Most noteworthy, Zarif failed to win from China any concrete assurance to help tackle the U.S. threat of economic sanctions. Instead, “we hope that with this visit to China and other countries we will be able to construct a clear future design for the comprehensive agreement,” Zarif said.