Total (TOT) became the first oil company to announce that it is pulling out of Iran in the wake of President Donald Trump pulling the U.S. out of the Iran nuclear agreement.
The French oil major said Wednesday that it will not be able to continue it’s South Pars 11 gas development project and will unwind all operations in Iran before Nov. 4 unless it’s granted a waiver by the U.S. government.
“Total has always been clear that it cannot afford to be exposed to any secondary sanction,” which could include the loss of financing by U.S. banks or inability to continue its operations in the U.S., the company said in a news release.
A secondary sanction would be a major loss for the company. It said over 90% of Total’s financial operation comes from U.S. banks, and U.S. assets account for over $10 billion of capital employed.
But Total assured investors that leaving Iran wouldn’t impact its production-growth targets.
Total shares closed down 1% at 63.21 on the stock market today. despite crude prices reversing higher on bullish U.S. supply data. Exxon Mobil (XOM) edged up 0.3% to 82.02. Chevron (CVX) fell 0.1% to 129.56, but is still in buy range after clearing a 128 buy point last week coming out of a cup-with-handle base. Royal Dutch Shell (RDSA) eased 0.3% to 72.42, in buy range, after breaking out of a cup-with-handle base with a 71.79 entry point. BP (BP) was off 0.2% at 46.71.
U.S. oil rose 0.3% to settle at $71.49 a barrel, and Brent crude rallied 1.1% to $79.28 a barrel.
Crude Inventories Fall
Domestic crude stockpiles fell by 1.4 million barrels last week, with gasoline inventories down by 3.8 million barrels, according to the U.S. Energy Information Administration.
Analysts had expected a 1.75 million-barrel decline in crude stockpiles. But the American Petroleum Institute reported late Tuesday a 4.854 million-barrel increase in crude stockpiles along with a 3.369 million-barrel drop in gasoline inventories.
Domestic production rose to 10.723 million barrels per day, up from 10.70 million bpd, EIA said.
Global Inventories Hit Milestone
Earlier, the International Energy Agency said Wednesday that global crude inventories are below average for the first time since 2014. That reflects the OPEC-Russia production curbs in recent years, even as U.S. production hits record highs.
While oil markets already priced in the impact of leaving the Iran deal, the IEA said Wednesday there is “understandable uncertainty” about Iran’s exports following President Trump’s decision to leave the Iran nuclear deal. The IEA added that production in Venezuela is in “free fall” as the country’s economic crisis worsens.
“For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market,” the agency said in its monthly oil market report.
The IEA also warned in its monthly oil market report Wednesday that its expects the “recent jump in oil prices will take its toll,” on demand. The agency lowered its outlook for global demand growth to 1.4 million barrels per day this year vs. a prior estimate for growth of 1.5 million bpd.
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