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Global Geopolitical Series: Iran’s willingness to negotiate with U.S. putting a lead on oil price

Oil price jumped from a cliff yesterday, after it was revealed by U.S. Secretary of State Mike Pompeo during a cabinet that Iran has signaled will9ngness to negotiate with the United States as President Trump repeatedly said that the United States is ready to negotiate with Iran without any pre-condition except one - Iran will not have nuclear weapons. The dire state of the Iranian oil exports, which declined from 2.5 million barrels per day in April 2018 to less than 0.5 million barrels per day in June 2019, also forced the Iranian leaders to reconsider their stance of not negotiating with the United States.

After Secretary Pompeo’s comments, the WTI oil price declined sharply by more than 3 percent, while Brent crude was down slightly less than 3 percent. WTI is currently trading at $57.9 per barrel, and Brent at $6.9 per barrel premium to WTI.

Here is the full commentary from Secretary Pompeo concerning Iran,

“…with respect to Iran, we’ve done three things.  We’ve supported the Iranian people.  The Iranian leadership is not doing what the Iranian people want it to do.  We’ve made clear that we support the Iranian people.

Second, we’ve continued to work with this coalition that all understands that the largest threat to Middle East security is, in fact, the Islamic Republic of Iran.

And, third, we’ve imposed a series of sanctions on the Iranian regime.  I remember, Mr. President, when we began, a lot of folks said that it wouldn’t work; if it was just America alone, it wouldn’t have any impact.  We — as of June, we’d taken down 90 percent, maybe 95 percent, of all the crude oil that was being exported from Iran around the world is no longer shipping.  You can see it.  The Iranian regime is struggling to figure out what they’re going to do with their economy because we have been terribly effective.

And the result is that — is that, frankly, I think it was yesterday or maybe the day before — for the first time, the Iranians have said that they’re prepared to negotiate about their missile program.  So we will have this opportunity, I hope.  If we continue to execute our strategy appropriately, we’ll have this opportunity to negotiate a deal that will actually prevent Iran from getting a nuclear weapon in the same way that the previous agreement had no chance of actually doing.”

Oil price is likely to struggle as Iranian and U.S. diplomats actually sit down for talks.  

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