What I do expect from the Trump administration is that this action could fall into the broad category of increasing pressure on Iran to secure a deal. However, Trump doesn't want to sit back and impose sanctions passively, adding a name or two to the list every now and then. He wants to keep putting new kinds of pressure on Iran until they come back to the table and negotiate. I don't think he wants to go for direct military action like the type that Israel and Iran have engaged in. My reading is that we won’t see an escalation from here – it was more tactical than strategic.
What does Iran want?
They keep saying that the sanctions are unjust and should be lifted. The current government has made it clear that they also want a deal - very badly – and are prepared to engage in discussions, but the Supreme Leader has also made it clear that he doesn't want to make a deal under increasing pressure.
Outlook for oil market balances this year?
We see demand growth at about 1.2 million b/d. Non-OPEC+ oil supply growth - including NGLs and condensate - is significantly larger than demand growth. We have it at around 1.8mbd total growth. That means the market will see a 600, 000 to 700, 000 b/d surplus if OPEC+ countries keep their production flat. OPEC+ will start adding volumes in April, and then at some point, they may need to revisit that. There’s room for them to do so until at least the end of the year if they get compliance improved, and if all else remains the same. That will leave us with some stock build, but it can be absorbed because we had a big stock draw last year. And, in the event that Trump’s measures actually impact Iranian exports of what we see at 1.2 million b/d this year, then market balances could turn out better, and probably with a higher price environment.