After President Trump made the announcement on Tuesday that the United States would be withdrawing from the Iran Nuclear Agreement, oil futures rose worldwide.
This is in anticipation of the barrel price of crude oil increasing, with output from Iran likely dropping by up to 400,000 barrels per day, thanks to renewed U.S. sanctions. Other producers have committed to increase their production, with Saudi Arabia pledging to ramp up exports to offset any drop in global supply.
U.S. shale oil producers are likely to increase production as well, which is giving American investors some renewed confidence.
5-Day performance for crude oil has increased 4.72% on the market, which contributes to the 1-Year growth of 44.24% (as of Thursday morning). West Texas Intermediate, a benchmark in oil pricing, was tracking at $71.14 per barrel at the end of Wednesday, marking a 2.92% increase.
Producers throughout the rest of the world may also benefit if worldwide barrel prices increase. Russia, which has an economy largely reliant on the energy industry and raw material sector, could gain significantly from the decision of President Trump.
When sweeping sanctions were last imposed on Iran, their oil production dropped by 1 Million barrels per day, and prices around the world increased by 15%.
What’s the Bad News if Oil Prices Continue to Increase?
Investors in the energy sector can gain from higher oil prices, however, consumers will ultimately lose out. Higher oil prices mean increased fuel costs, which would impact almost every industry in the United States today. Food and commodity prices could increase slightly, and gasoline prices will increase at the pump.
The full impact is difficult to predict at this time, although there is a possibility that the negative effects could erode some of the benefits that were gained from income tax cuts earlier this year.
This situation will continue to develop, and the initial indications are that any negative effects will be mitigated and sustainable. The economy in the U.S. has grown significantly throughout the last year, and changes in oil and commodity prices will be less painful for the general public. As far as investors are concerned, confidence on the market has not decreased, and the withdrawal from the nuclear agreement could actually benefit those who have diversified their investments into energy, oil, and related stocks.
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