Investment bank Goldman Sachs said in a note that Trump's announcement brought upside risks to its forecast that Brent crude will hit $82.50 USA a barrel by the summer.
Iran used to sell crude oil only under long-term contracts, before the imposition of sanctions against the country in 2012.
The oil price rose on Thursday and was set for its largest weekly increase in a month, as the market prepared for potential disruption to crude flows from major exporter Iran in the face of US sanctions. Oil prices have surged as the output cut agreement by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russian Federation, has held.
U.S. President Donald Trump today pulled out of the Iran nuclear deal.
That made Iran the third-biggest exporter of crude within the Organization of the Petroleum Exporting Countries0, behind Saudi Arabia and Iraq. A majority goes to Asia, with Europe receiving about 600,000 bpd. Its effective cut is closer to 1.8 million bpd due to involuntary losses in some countries, according to industry estimates, before any impact on Iran is considered.
The threat of new sanctions comes as demand in Asia, the world's biggest oil-consuming region, hit a record and producers, including Saudi Arabia and Russian Federation restrict supply to prop up prices.
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Syria accuses Israel for air strike at army base
It put the area, which is Syrian territory under Israeli control, under high alert and instructed bomb shelters to be unlocked. The move comes just after President Donald Trump announced he planned to withdraw from the Iranian nuclear accord.
A senior official with a Chinese oil major, who declined to be identified because he is not authorized to speak to the media, said new sanctions would hurt Chinese refiners by pushing up the price of crude.
"You need to work with your partners in dealing with any potential effect on supply", the OPEC source said.
A drop in Iranian exports due to a return of USA sanctions, plus involuntary supply losses in other OPEC members such as Venezuela would mean the supply cut would be significantly larger than intended. Current agreements keep the output curbs in place until December 2018, with a meeting scheduled to review these production agreements in June.
Oil jumps to a fresh three and a half year high as tensions in the Middle East continue to rise.
Trade data already show a reduction of Iranian oil supplies to Japan and South Korea, and refinery sources confirmed they had started shifting purchases in preparation for renewed sanctions. "It is too early now to do that", the source said.
"The rebalancing of the oil market is a long process that is now in its 4th year".
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