Crude Oil Prices Settle 3% Higher After US Terminates Iran Nuclear Deal

Investing.com – Crude oil prices settled at three-and-a-half year highs as data showing oil supplies fell for the first time three weeks sparked another wave of buying pressure following strong gains on the back of the United States’ decision to leave the Iran nuclear deal.

On the New York Mercantile Exchange for June delivery rose 3.01% to settle at $71.14 a barrel, while on London’s Intercontinental Exchange, rose 2.38% to trade at $77.22 a barrel.

Inventories of U.S. crude fell by 2.197 million barrels for the week ended May 4, beating expectations for of just 0.200 million barrels, according to data from the Energy Information Administration (EIA).

The large draw in crude supplies came as product inventories fell despite an unexpected reduction in refinery activity by 0.7%, according to the EIA.

Gasoline inventories – one of the products that crude is refined into – by 2.174 million barrels, beating expectations for a decline of 0.450 million barrels, while supplies of distillate – the class of fuels that includes diesel and – by 3.791 million barrels, well above expectations for a draw of just 1.375 million barrels.

Crude oil prices made a strong start to the day, as traders raised their bets on an extended rally in oil prices on the back of lower global supplies following U.S. President Donald Trump’s decision to withdraw the United States from the Iran nuclear deal.

The president’s decision to abandon the deal paved the way for the U.S. to reinstate sanctions on Iran after 180 days. The U.S. sanctions on Iran will likely have an immediate impact of less than 200,000 barrels per day and will block less than 500,000 barrels after six months, according to most analysts surveyed by S&P Global Platts.

New Iranian sanctions should eventually lead to higher oil prices, erasing the backwardation in crude, providing a path for oil prices to stay elevated for quite some time, National Alliance said.

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