Why Iran's Deepening Isolation Is a Boon to U.S. Oil Producers

(Bloomberg) -- Some of the biggest beneficiaries of sanctions aimed at crippling Iran are oil companies on the other side of the world.

Drillers based in places like Texas, Oklahoma and California added billions of dollars in market value on Monday after the Trump administration announced it’ll no longer give nations like China and Italy a pass on sanctions barring purchases of Iranian crude. Despite Saudi Arabian assurances that any supply gaps will be plugged, oil explorers surged more than any other sector in the S&P 500 Index.

If the U.S. succeeds at its stated goal of pushing Iranian crude exports to “zero,” there will be a ripple effect across the globe as other producers compete to capture market share. The disappearance of Iranian barrels also “will modestly push up prices” for crude, boosting cash flows for American explorers, said David Goldwyn, a Washington-based energy consultant and former Obama administration official.

Why Iran's Deepening Isolation Is a Boon to U.S. Oil Producers

Independent drillers like Carrizo Oil & Gas Inc., Marathon Oil Corp. and Devon Energy Corp. clocked some of the biggest gains. Supermajors Exxon Mobil Corp. and Chevron Corp. also climbed, adding as much as $13 billion in combined market value in a matter of hours.

Investors probably were surprised by the sudden, stern stance toward the waivers, said John McCarrick, a former official in Trump’s state department. The measure marked “a significant step away from less-forceful previous guidance regarding sanction exemptions,” he said.

“Zero really means zero this time.”

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