May 7 (UPI) -- Uncertainty about the U.S. role in the nuclear agreement with Iran was the clear driver in pushing oil prices to fresh highs for the year on Monday.
U.S. President Donald Trump has until Saturday to decide whether or not to issue a sanctions waiver to Iran. If he doesn't, he would be out of compliance with the U.N.-backed agreement and signal the end of the line for a U.S. president that's surrounded himself with advisors with a hawkish view on Tehran.
Ole Hansen, the head of commodity strategy at Danish investment firm Saxo Bank, said in response to questions sent by UPI that market players loath uncertainty and that uncertainty is contributing to a spike in crude oil prices, even if most observers have long expected Trump would leave the agreement.
Trump's decision could limit the estimated 1 million barrels of Iranian oil flowing in a market that has little room for a shortage, even if Iranian clients cut off imports completely.
"Such an outcome, however unlikely, would have a significant impact on global balances and would support current and probably even higher prices," Hansen said. "Saudi Arabia who would like to see oil back at $80 per barrel is unlikely to step in with extra barrels unless the spike extends beyond that level."
The price for Brent crude oil was up 1.35 percent as of 9:16 a.m. EDT to $75.88 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, broke through a psychological threshold to gain 1.25 percent to $70.59 per barrel.
Phil Flynn, the senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter the global energy market is sensitive to any shortages because the big surplus that dragged oil prices below $30 per barrel a little more than two years ago has been drained in part by a decision from the Organization of Petroleum Exporting Countries to limit production.
"The breakout $70 a barrel is not a fluke," he said.
Meanwhile, an intelligence brief from the Soufan Center, a research group founded by former FBI special agent Ali Soufan, said European partners, Russia and China could keep most of the deal in place, even without the United States. Non-U.S. parties to the agreement could encourage their companies that deal with Iran to keep their relationships in place and offer incentives to do so with sanction shields.
At home, the Trump decision on the Iranian deal could backfire just in time for midterm elections later in the year. The president has already complained to OPEC that oil prices are too high. If oil prices move closer to $80 per barrel, it would push gas prices above $3 per gallon in the domestic market, a psychological point that could trigger a change in consumer behavior.
"His base is likely to be more concerned about rising gasoline prices into the driving season than worry about Iran," Hansen added.