The price of oil is currently benefiting from a certain ‘risk premium’ that is related to the nuclear program in Iran, an energy expert stated recently.
Addison Armstrong, who works as senior director of market research at energy management advisory firm Tradition Energy, which is based in Stamford, Conn., recently told CNBC he believes that the commodity might be higher in value because of the turmoil that exists in the Western Asian nation.
“There’s a $10 to $15 ‘risk premium’ in the price of oil, and it’s been there for quite a while – just related to what’s going on with Iran, its nuclear program and the West’s reaction to it,” Armstrong told the news source. “So any progress that they make that starts to take away some of that concern about Iran helps to lower the price of oil.”
Iranian turmoil and the oil market
Individuals who want to make money by trading this commodity might benefit from knowing about the supposed boost that it is receiving from the current turmoil that exists in the Western Asian nation.
The perceived threat that has been created by the nuclear program of this nation may soon be alleviated. On Nov. 6, a senior official in the Obama Administration stated that if Iran is willing to temporarily halt its efforts in this particular area, the U.S. would be willing to lift some of the economic sanctions that have been imposed, according to The New York Times. The official told reporters this on the condition of anonymity. He specifically said that he was looking for a sign of good will from Iran.
“Put simply, what we’re looking for now is a first phase, a first step, an initial understanding that stops Iran’s nuclear program from moving forward for the first time in decades and that potentially rolls part of it back,” the senior official stated, the media outlet reported. “In response to a first step agreed to by Iran that halts their program from advancing further, we are prepared to offer limited, targeted and reversible sanctions relief.”
The official said that the concessions provided by the United States would depend on the actions of Iran, according to the news source. The individual noted that the goal for now would be to obtain an initial step toward greater peace, as the U.S. government was looking for something more substantial in the long run.
Iran close to resolution
Many experts are optimistic that an agreement will be reached soon, which has helped to put downward pressure on the price of oil over the last several months, CNBC reported.
Six Western nations were scheduled to resume their discussions with Iran on Nov. 7 in an effort to end the nuclear activity, according to Reuters. The negotiations involved have been helping to prevent the price of oil from appreciating too much based on other factors. The perception that the parties involved are closer to obtaining a resolution has helped to reduce the risk premium. Armstrong noted that while progress has been made in reaching an agreement, such an agreement is still far away, CNBC reported.
“There’s a long way to go until we get some sort of concrete deal,” Armstrong told the news source. “But the most important thing is that there are confidence-building measures on each side.”
Some experts have warned that the nuclear program in Iran has enjoyed enough progress to enable the creation of weaponry, according to The New York Times. The situation could potentially be complicated by Congress, which has been working to place greater restrictions on Iran.
Expert: Chances of resolution high
Kevin Book, head of research for Washington-based international energy policy firm ClearView Energy Partners, expressed his optimistic view of the situation, CNBC reported.
“We give slightly better-than-average odds to an agreement in principle right now,” he told the news source. Book noted the progress that has been made in the situation. “What we’re seeing is an unprecedented enthusiasm on the part of the U.S. government, taking steps that haven’t been taken in more than three decades … It is unlikely to succeed immediately, but the trajectory has been, against all odds, to continue.”
Agreement could create headwinds for oil
In the event that the market expert is accurate in his prediction that the situation will soon be resolved, such a development could serve to put downward pressure on the price of oil. Anyone who wants to make money trading this particular commodity may benefit from being informed about the latest news regarding the Iran situation.
People who want to make money from oil-related transactions might also feel more confident about engaging in such trades if they can get a good sense of what the outcome of the current negotiations will be – and how it will impact the price of this commodity.
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