Oil prices surged to their highest levels since November 2014 as investors braced for U.S. President Donald Trump's decision on whether to withdraw from Iran's nuclear deal with world powers.
Trump is due to announce his decision at 2 p.m. Washington time on May 8, and most investors expect him to pull the United States out of the landmark 2015 agreement, in a move that would reimpose U.S. sanctions on Iran's oil sector and central bank and sharply ratchet up tensions with the top oil producer.
Fears that the United States will reimpose sanctions that were lifted in exchange for curbs on Iran's nuclear activities in 2016 sent premium crude prices above $70 a barrel in New York trading on May 7 for the first time since November 2014.
London's benchmark Brent North Sea crude prices soared to $76.17, also the highest since late 2014. Oil prices gave back some of their gains in Asian trading early on May 8.
"Oil has raced higher recently on the back of concerns that President Trump will exit the U.S. from the Iran nuclear deal and that this would then lead to a further deterioration in the situation in the Middle East, not to mention the disruption to oil supplies of Iran's production," said Greg McKenna, chief market strategist at AxiTrader.
He added that there is a "perfect storm for higher prices" as the United States has recently imposed fresh sanctions on two other major oil producers -- Russia and Venezuela -- also raising tensions as well as the possibility of production shortfalls.
But while investors worried about the market effects of Trump's decision, the Iranian Oil Ministry announced that it expects to continue pumping and exporting oil even if the United States pulls out of the agreement.
"They cannot stop Iran. Our oil industry's development will continue even if new sanctions are imposed on Iran," the ministry's SHANA news service quoted Gholamreza Manouchehri, deputy head of the National Iranian Oil Company, as saying on its website.
Iran re-emerged as a top oil exporter in January 2016 when international sanctions were lifted under the deal. Manouchehri said Iran plans to finalize seven contracts worth around $40 billion with foreign investors by mid-year, SHANA reported.
Iran produces nearly 4 million barrels a day out of global total of about 98 million barrels per day.
Most of Iran's increased oil business since 2016 has been with European and Asian businesses and consumers, as U.S. businesses are still prohibited from engaging with Iran.
Deputy Oil Minister Amirhossein Zamaninia said "if we can continue to sell our oil and its products" around the world, Tehran will continue to honor the nuclear deal even if the United States pulls out.
While some analysts have estimated the renewed U.S. sanctions could cut Iran's oil sales by between 200,000 and 600,000 barrels a day, Zamaninia expressed optimism that Iran will be able to maintain its current oil market and keep securing foreign investment in its oil industry.
Iranian President Hassan Rohani also said on May 7 that his country would remain in the nuclear accord even if the United States withdraws, on the condition that the other parties stick with the agreement.
"Either what we want from the nuclear deal is guaranteed by the non-American parties, or it is not the case and we will follow our own path," Rohani said on the president's website. "We are prepared for all scenarios."
Britain, France, and Germany made last-ditch efforts to try to persuade Trump to keep honoring the deal. Trump is operating under a May 12 deadline for deciding whether to reimpose U.S. sanctions on Iran.
“We are determined to save this deal because this accord safeguards against nuclear proliferation and is the right way to stop Iran getting a nuclear weapon,” said French Foreign Minister Jean-Yves Le Drian on May 7.
"It has weaknesses, certainly, but I am convinced they can be remedied," said British Foreign Secretary Boris Johnson in a New York Times opinion piece.
"Indeed, at this moment Britain is working alongside the Trump administration and our French and German allies to ensure that they are," he wrote.
Even as the pled with Trump to stick with the deal, media reported that European powers were making preparations -- as was Iran -- for dealing with what they considered to be a likely U.S. withdrawal in full or in part from the deal.
