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The U.S. withdrawal from the Iran nuclear deal threatens to send oil prices higher, as Washington renews sanctions on the OPEC producer at a time of tightening world markets.

In a tweet Wednesday, Donald Trump urged the Organization of Petroleum Exporting Countries (OPEC) to agree on higher production quotas at its meeting next week, although some analysts suggest the U.S. President’s intervention makes it less likely that a deal can be struck.

The International Energy Agency (IEA) warned Wednesday that global oil demand continues to rise, while there is relatively little spare capacity to make up for the looming declines in Iranian and Venezuelan exports.

While U.S. shale production continues to grow, its potential is limited by a shortage of pipeline space, drilling crews and even truck drivers, while only Saudi Arabia has capacity to expand production dramatically in the short term.

The IEA estimates Iranian exports could decline by as much as one million barrels a day because of the reimposition of sanctions by the Trump administration that ended the nuclear-arms deal signed by former president Barack Obama.

Venezuela – which also faces American sanctions – could see a further drop of 500,000 b/d of production on top of the one-million-barrel loss that it experienced in the past two years. The country’s state-owned oil company is in crisis because of its poor management and a lack of investment from both the Venezuelan government and foreign sources.

“Even if the Iran/Venezuela supply gap is plugged, the market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption,” the Paris-based IEA said in its monthly oil market report.

Global crude prices have climbed in recent months given robust demand growth in 2017 and the first half of this year, combined with production restraint by OPEC and non-OPEC producers, such as Russia, and cratering Venezuelan supply.

Brent crude closed Wednesday at US$76.74 a barrel, up US$10 from its average in March. West Texas intermediate closed at US$66.64, up US$4 from March.

Consumers have seen gasoline prices rise sharply in the past year. The average Canadian pump price was $1.35.9 a litre on Wednesday, up from $1.09.4 a year ago. U.S. prices averaged US$2.91 a gallon this week, up from US$2.37 a year ago.

The higher fuel costs have prompted a response from Mr. Trump, whose administration has reportedly been urging Saudi Arabia to boost its production to make up for anticipated declines of Iranian exports.

“Oil prices are too high, OPEC is at it again. Not good!,” the President tweeted on Wednesday morning.

Iran’s OPEC governor, Hossein Kazempour Ardebili, fired back at Mr. Trump in a statement to Reuters. “You cannot place sanctions on two OPEC founder members and still blame OPEC for oil price volatility,” he said. “This is business, Mr. President – we thought you knew it.”

Saudi Arabia supported Mr. Trump’s decision to exit the Iran nuclear agreement, said Divya Reddy, an analyst with Eurasia Group, a political-risk consultancy based in New York.

“Saudis are inclined to heed the President’s call on this and signal they will unwind the [production] cuts,” Ms. Reddy said. “But it hurts them on the other side because countries like Iran and Venezuela are more inclined to double down.”

OPEC operates on consensus and the President’s tweets will make it even more difficult to get cartel members such as Iran and Venezuela to agree on increased quotas for other members when the increased production would replace their crude in the market, she said.

However, the Saudis are more likely to boost output on their own, while Russia is also keen to increase its production.

“Official or unofficially, they are going to have to increase production because the market is going to be too tight otherwise,” Amrita Sen, chief oil analyst at London-based Energy Aspects Ltd, said in an interview.

RETAIL GASOLINE PRICE MOVEMENTS

Indexed, June 2017=1

1.7

Brent

Germany

U.S.

France

Japan

Spain

Canada

Italy

Britain

1.5

1.3

1.1

0.9

F

M

A

M

J

2017

J

A

S

O

N

D

J

2018

GLOBAL OIL DEMAND

Yearly averages, in million barrels per day

2017

2018

2019

Africa

Americas

Asia/Pacific

Europe

FSU*

Middle East

World

Annual change

* Former Soviet Union countries

4.3

31.4

33.9

15.1

4.7

8.3

97.8

1.6

4.4

31.7

34.6

15.2

4.8

8.4

99.1

1.4

4.5

32

35.4

15.3

4.9

8.5

100.6

1.4

THE GLOBE AND MAIL,

SOURCE: INTERNATIONAL ENERGY AGENCY

RETAIL GASOLINE PRICE MOVEMENTS

Indexed, June 2017=1

1.7

Brent

Germany

U.S.

France

Japan

Spain

Canada

Italy

Britain

1.5

1.3

1.1

0.9

F

M

A

M

J

2017

J

A

S

O

N

D

J

2018

GLOBAL OIL DEMAND

Yearly averages, in million barrels per day

2017

2018

2019

Africa

Americas

Asia/Pacific

Europe

FSU*

Middle East

World

Annual change

* Former Soviet Union countries

4.3

31.4

33.9

15.1

4.7

8.3

97.8

1.6

4.4

31.7

34.6

15.2

4.8

8.4

99.1

1.4

4.5

32

35.4

15.3

4.9

8.5

100.6

1.4

THE GLOBE AND MAIL, SOURCE: INTERNATIONAL ENERGY AGENCY

RETAIL GASOLINE PRICE MOVEMENTS

Indexed, June 2017=1

1.7

Brent

Germany

U.S.

France

Japan

Spain

Canada

Italy

Britain

1.5

1.3

1.1

0.9

F

M

A

M

J

2017

J

A

S

O

N

D

J

2018

GLOBAL OIL DEMAND

Yearly averages, in million barrels per day

2017

2018

2019

Africa

Americas

Asia/Pacific

Europe

FSU*

Middle East

World

Annual change

* Former Soviet Union countries

4.3

31.4

33.9

15.1

4.7

8.3

97.8

1.6

4.4

31.7

34.6

15.2

4.8

8.4

99.1

1.4

4.5

32

35.4

15.3

4.9

8.5

100.6

1.4

THE GLOBE AND MAIL, SOURCE: INTERNATIONAL ENERGY AGENCY