Iran's Nuclear Lies: What Oil Investors Need to Know
You probably saw the presentation slide just as clearly as I did.
Yeah, the one that said in big bold letters that Iran lied about its nuclear weapons program.
Essentially, Israeli PM Netanyahu laid out his evidence that Iran had hid its program, titled Project Amad, from the world. He even showed us a picture of the building in which Iran had hidden it.
Project Amad had one purpose: developing nuclear weapons. Specifically, it was to design and produce five warheads with a 10-kiloton yield that could be placed on a missile.
For the record, the bomb that was dropped on Hiroshima exploded with the energy of approximately 15 kilotons of TNT.
For proof, he said Israel had obtained over 100,000 documents that show the deceit, including over 55,000 pages of documents and 183 CDs.
He called it Iran’s hidden “atomic archive.”
So much for those claims in the past that Iran wasn’t pursuing nuclear weapons.
Look, you and I both know the timing of Netanyahu’s announcement wasn’t by happenstance.
Let’s give everyone that much credit, at least.
What also wasn’t shocking was the fact that crude oil prices surged as he was giving his presentation, with WTI prices jumping to $69 per barrel in a heartbeat.
Brent crude surged past $75 per barrel.
And I know many of you are probably asking yourselves what this new revelation means for you and your oil stocks.
Let me explain...
Lies, Damn Lies, and Oil Exports
Tick-tock, tick-tock goes the sanctions clock.
Perhaps the most cunning part of Netanyahu’s announcement was its timing. You see, he had already told President Trump about this last March.
So why did he wait to release this powerful news to the public?
It all comes down to sanctions.
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The looming deadline on whether or not President Trump would withdraw from the 2015 Iran nuclear deal is May 12th.
Withdrawing from the deal and placing sanctions back on Iran would have an incredible impact on Iran’s economy, which as you know is very dependent on oil export revenue.
Let’s be honest here: This couldn’t have come at a worse time for Iran.
Last month, Iran’s oil exports hit 2.6 million barrels per day. That’s the highest they’ve been since the nuclear deal was struck back in 2015. The country was on track to boost exports back to around 5 million barrels per day.
Things were on the up-and-up... until now.
So who stands to win from this geopolitical mess?
Iran Sanction: Winners and Losers
If you think Trump is going to stick with Obama’s 2015 deal, you probably haven’t been paying attention to how he’s been treating other Obama legacies, and I’ll have some bad news for you about Iran.
Now, he has all the reasons he needs to pull out of the nuclear deal.
That means sanctions will be put back in place. And when that happens, Iranian oil exports will drop precipitously again.
What that means is that countries like China, Korea, Japan, and India (Iran’s largest oil customers) are going to have to look elsewhere for the nearly million and a half barrels of crude they purchase from Iran on a daily basis.
But before you start shouting for oil prices to skyrocket back into triple-digit territory, just keep in mind that other producers can easily pick up the slack.
That list includes Saudi Arabia, Russia, and, of course, the United States.
Granted, if there’s one thing we can count on right now, it’s that a lot more oil is going to be exported out of the U.S. in the near future. At last count, the United States was exporting roughly 2.3 million barrels per day.
Sure, we may see fear push crude prices above $80 per barrel, but it would take more than that for a spike overnight.
War... yeah, that might do it.
It’s hard not to see Texas coming out on top of this situation.
The state is producing more oil than all but two OPEC members!
Yet, the game is changing as you read this.
And it’s all thanks to a 330-meter, blue-and-red striped behemoth we’ll talk about next week.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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