Oil Prices Rollback Amidst Pressures on Demand Outlook
Oil prices lost more than 3% this week ahead of the Organisation of Petroleum Exporting Countries and allies (OPEC+) production volume decision for December amidst rising inflation in major economies, driven in part by high energy costs.
The slowdown was also supported along with the surprise announcement on the resumption of the landmark 2015 nuclear deal between Iran and the US, which, if approved, would enable Iranian oil to return to the market.
Reports of a possible resumption of the landmark 2015 nuclear deal between Iran and six other nations this month impacted the oil market. The renewed talks will kick off in Vienna on Nov. 29, according to Iran’s principal negotiator, Ali Baqeri Kani.
Analysts believe that if the deal resumes, the U.S sanctions on Iran would be removed, paving the way for Iran to restart oil exports.
After about 60% gain in 2021, Brent crude price traded at $81 per barrel on Friday, posting a 3.14% loss from the Monday session that opened at $83.63 a barrel.
Also, American benchmark West Texas Intermediate (WTI) registered at $79.44 per barrel at the same time on Friday, up 4.70% relative to $83.36 a barrel on Monday opening.
Despite the global energy crunch that continues to fuel inflation, the world’s major oil producers on Thursday agreed to stick to the existing plan of raising production by 400,000 barrels per day (bpd) in December, and incrementally phasing out production cuts.
Unfazed with pressures from the U.S administration, the Organisation of Petroleum Exporting Countries and allies (OPEC+) stick to an agreement on Thursday.
The pressure was put on producers to help combat climbing gasoline prices, which are feeding concerns that higher inflation due to rising energy costs could derail the economic recovery from the COVID-19 pandemic.
The U.S had made the same request several times. Amidst rising global oil prices, China has released from its fuel reserve which plunged demand and then prices this week.
Price slumps emerged when the world’s largest oil consumer, China, said it released gasoline and diesel reserves to improve market supply and support price stability in some regions.
The National Food and Strategic Reserves Administration said the reserves were released in response to the recent supply and demand dynamics on the local oil product market.
Oil prices came under further pressure after the US Energy Administration (EIA) announced a more-than-expected build in crude oil inventories on Wednesday.
US commercial crude oil inventories increased by 3.3 million barrels to 434.1 million barrels, higher than the market expectation of a 1.65 million-barrel rise.
Iran and six other powers have been in talks since April to restore the 2015 nuclear deal that was terminated three years ago by former US President Donald Trump.
His administration re-imposed sanctions that severely hampered Iran’s economy and drastically reduced its oil exports. Although a slew of sanctions aimed at the energy industry in Iran was lifted on June 10, sanctions on oil exports are still in place.
Since the election of Iran’s new hardline president in June, talks have halted. Now all eyes are on the US administration, which had previously said it could use every tool at its disposal “to address anti-competitive practices in US and global energy markets.”
The country had bought up the option of tapping into the Strategic Petroleum Reserves (SPR). Nonetheless, experts maintain this would do little to bring prices down.
The US has the world’s largest SPR of more than 600 million barrels stored in huge underground salt caverns at four sites along the coastline of the Gulf of Mexico. # Oil Prices Rollback Amidst Pressures on Demand Outlook
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