Oil prices are going nuclear as President Donald Trump pulled out of the Iranian nuclear accord creating a new risk dynamic for global oil markets. The decision by president Trump to pull the plug on what he said was a horrible deal comes as global oil demand is rising and the lack of investment in the oil patch is making it difficult for global oil production to keep pace with demand. Even the fact that the Energy Information Administration raised its 2018 crude oil production estimate to a record 10.72 million barrels a day this year and another record projection of 11.86 million barrels a day next year, it was not enough to calm the market as the supercycle in oil, that we predicted a few years back, is becoming more apparent to the marketplace.

The deal means shale oil producers will win, as well as U.S. Energy Companies if they did not commit a lot of money to Iran. Even the commitment by Saudi Arabia to help stabilize global oil was not comforting, considering that the Saudis want $80 a barrel oil anyway. The UAE also vowed to step in if needed but the reality is that even with the oil coming out of Iran the global oil market is currently undersupplied as it is.

The Saudis also, of course, are forced to shoot down missiles fired from Iranian backed Houthi Iranian rebels. That happened again overnight as the Trump Administration laid out more Iranian misdeeds as its reason for pulling out of the deal, such as The support for the Assad regime in Syria and its complicity in Assad’s atrocities against the Syrian people. In Yemen, the regime has escalated the conflict and used the Houthis as a proxy to attack other nations. In Iraq, Iran’s IRGC sponsors Shia militant groups and terrorists. In Lebanon, the Iranian regime enables Hezbollah to play a highly destabilizing role and to build an arsenal of weapons that threaten the region, according to the White House.

The Wall Street Journal reports that Iran has recently been exporting 2.7 million barrels a day of crude or close to 3% of global supplies. That supply will dwindle away and with demand growth, it will keep prices on an upward track.