Oil tumbles ahead of Trump's decision on Iran

Oil tumbles ahead of Trump's decision on Iran (AFP/Haidar Mohammed Ali)

Many analysts expected Trump not to walk away from the Iran deal without offering any compromise, a hope that dragged oil prices down by around US$2.00 on the benchmark WTI index and just a little less on Brent.

But some experts were more pessimistic, leading prices to resist any further falls.

World stocks including the US' were down, meanwhile, as the dollar climbed, with Jasper Lawler at the London Capital Group writing: "It looks like King dollar is back."

The US president is due at 1800 GMT to announce whether or not to tear up an agreement with Tehran and reimpose painful sanctions that could cut off crude supplies.

"Decision Day for President Donald Trump and the Iran nuclear deal saw oil prices pulling back further from 3.5-year highs as signs that the US may consent to a 'fudge' proposal that's been the subject of furious diplomatic activity for weeks," noted Ken Odeluga, market analyst at City Index trading group.

Despite being urged by world leaders to honour it, investors fear he will refuse to preserve the 2015 pact, fanning fears of fresh turmoil in the already tinderbox Middle East.

According to the New York Times, Trump told French President Emmanuel Macron Tuesday he is planning to announce the US' withdrawal from the deal.

Fears of a pullout - along with an output cap by Russia and the OPEC cartel, rising US demand and an improving world economy - had helped send the price of oil to highs not seen since late 2014, though profit-taking saw both main contracts retreat on Tuesday.

HIGH-STAKES 'BRINKMANSHIP'

Iran has said Washington will regret it "like never before" if Trump walks away from the deal.

Since his election Trump has repeatedly criticised OPEC and Russia over a deal sealed in 2016 that has boosted the price of oil following a slump brought about by a global oil glut.

But now, according to XTB chief market analyst David Cheetham, the price of oil may soar to US$80 a barrel "in the not too distant future if the Iranian deal is terminated and sanctions reimposed".

Cheetham warned that, should sanctions be reintroduced, the impact on the market would far outweigh the effect on prices of the OPEC-Russia deal.

However, for all of Trump's bombastic rhetoric on the Iran deal, Cheetham said the US may eventually have to toe a more diplomatic line.

"In a similar vein to the approach adopted with the steel and aluminium tariffs, the president is likely engaging in a game of brinkmanship to achieve his desired outcome," Cheetham wrote. "However the stakes here are far higher!"

Key figures around 1530 GMT:

Oil - Brent North Sea: DOWN US$1.68 at US$74.49 per barrel

Oil - West Texas Intermediate: DOWN US$2.10 cents at US$68.63 per barrel

London - FTSE 100: FLAT at 7,565.75 points

Frankfurt - DAX 30: DOWN 0.3 per cent at 12,912.21

Paris - CAC 40: DOWN 0.2 per cent at 5,521.93

EURO STOXX 50: DOWN 0.2 per cent at 3,557.88

Tokyo - Nikkei 225: UP 0.2 per cent at 22,508.69 (close)

Hong Kong - Hang Seng: UP 1.4 per cent at 30,402.81 (close)

Shanghai - Composite: UP 0.8 per cent at 3,161.50 (close)

Euro/dollar: DOWN at US$1.1862 from US$1.1922 at 2100 GMT

Pound/dollar: DOWN at US$1.3517 from US$1.3556

Dollar/yen: DOWN at 108.94 yen from 109.07 yen