Oil hits 3-1/2 year high after US exits from OPEC

Hyderabad: Global crude oil prices on Wednesday hit $77 a barrel, a day after US President Donald Trump reimposed sanctions on Iran. Tehran’s regional rival Saudi Arabia quickly moved in to reassure the global oil market to compensate any shortage in supply on the account of lower oil sales by sanction-hit Iran.

Iran is the third-biggest producer of crude oil within oil cartel Opec, after Saudi Arabia and Iraq. Though Iran is the third largest oil supplier to India, a top official of Indian Oil said the US sanctions would not impact India’s oil purchases from Iran as the country pays in euros. However, if Europe too imposes the sanctions, India would find it difficult to pay for Iranian oil. The re-imposition of sanctions means companies worldwide must stop doing business with the country or run afoul of the US government. At the core of the US sanctions is a threat to cut-off companies that deal with Iran or its companies from the US banking system.

While the sanctions have had an immediate impact on the global crude oil market, the fallout is expected to be wider impacting several non-oil businesses. Major companies that could take a hit because of US sanctions on Iran are France-based Total, Airbus, and Accor, Germ-any-based Volkswagen, Spain’s Melia and US-based Boeing and GE. Analysts feel that the move could affect Europ-ean companies more than the American companies. Companies and countries with commercial deals with Iran would have either 90 or 180 days to wind down those activities, depending on the type of products being sanctioned. “US Iran sanctions are hardly hitting any US companies, but aim primarily at European ones,” Carl Bildt, the co-chair of the European Council on Foreign Relations, said in a tweet.