By Grant Smith & Ben Sharples
Nov 25, 2013 8:52 AM ET
Brent crude (click here) led energy prices from gasoline to heating oil lower after Iran and world powers reached an interim accord on the country’s nuclear program that will ease economic sanctions while keeping a cap on oil sales.
Futures slid as much as 2.7 percent in London, declining for the first time in four days, while West Texas Intermediate fell 1.7 percent. Iran’s crude exports will be held to about 1 million barrels a day under sanctions that remain in force after the deal announced yesterday in Geneva, according to the White House. Gasoline and heating oil futures each slid at least 2.3 percent on the New York Mercantile Exchange....
Americans never really understood how sanctions worked. But, now that sanctions are being eased the reality comes alive. The burden on easing sanctions further sincerely belongs to Iran. They have plenty incentives to make the peace process work with compliance to it's conditions. I sincerely don't see Iran backpeddling. It would be unfortunate if that occurred.
One of Israel's worries is that there will be abuses to the peace accord. It can be argued there were abuses before the peace agreement. But, it was an interesting reaction on Wall Street. the price of Brent Crude marginally moved down and airline stocks moved up almost in the same amount the oil fell. The idea, of course, is that with oil prices due to fall if Iran is finally allowed to produce it's oil at will, the cost of jet fuel will fall.
November 25, 2013 7:00 am
By Ajay Makan
...China, India, Japan and South Korea account for the vast majority of Iranian crude purchases, after the US granted them waivers from sanctions in return for reducing purchases.
China and South Korea have sharply cut imports in recent months in order to comply with those conditions, but may now act with less urgency, as the US State Department has pledged to allow purchases to continue at current levels over the next six months.
A key issue will be interpretation. A State Department fact sheet released shortly after agreement was reached in Geneva said Iran “will be held to approximately 1m barrels a day in sales”, which is somewhat below traders’ estimates of the current Iranian crude export levels. A text of the interim deal posted on an Iranian news website said western powers would “pause efforts to reduce Iran’s crude oil sales”....
I honestly don't see this failing. There are too many incentives for Iran to agree to reassurances, even on a daily basis, to back peddle on any of the agreement. In addition to the oil and airline movement, the Iranian currency began to see gains in it's value. The world is letting Iran know it is proceeding in an acceptable manner to remove sanctions and have every reason for hope for the future.
I sincerely hope Iran succeeds to continue to build confidence through compliance of agreements. The country should not seek to violate those confidences and should consider where any non-compliance might be taking place in it's private sector.
Nuclear capacity is a very big deal. This is important to build on the reality of a nuclear free Mideast. Iran really needs to make this work. The world would become a very unhappy place if Iran changed course now. And for Wall Street. Quite frankly, they would do an about face and adjust to war as easily as it adjusted to easing of sanctions.
