Oil Prices Soar over Adjourned Iran Nuclear Talks
Oil prices soared on Monday as Iran Nuclear talks remain inconclusive as both Brent Crude and US West Texas Intermediate hovering upward, after a hardline candidate won Iran’s presidential election, casting doubt on the future of US-Iran negotiations.
Iranian oil in the market would have raised supply volume which investors feared could result in a declining price as the global economy continues the healing process with an improved record of vaccinations.
Supporting the market rally, United States dollar retreated from two-month highs. Brent crude for August gained $1.24, or 1.7% to $74.74 a barrel while U.S. West Texas Intermediate (WTI) crude for July rose $1.94, or 2.7% to $73.59.
Both benchmarks have risen for the past four weeks on optimism over the pace of global COVID-19 vaccinations and expected pick-up in summer travel. The rebound has pushed up spot premiums for crude in Asia and Europe to multi-month highs.
Bank of America said that Brent crude was likely to average $68 a barrel this year but could hit $100 next year on unleashed pent-up demand and more private car usage.
Oil was boosted by a weaker U.S. dollar DXY, which can send speculative investors into greenback-denominated assets like commodities.
Negotiations to review the Iran nuclear deal was postponed on Sunday after hardline judge Ebrahim Raisi won the country’s presidential election.
“The election of a hardliner in Iran is weighing on the market (supply) as sanctions look less likely to be lifted,” said Bob Yawger, director of Energy Futures at Mizuho in New York in a note.
A deal could lead to Iran exporting an extra 1 million barrels per day, or 1% of global supply, for more than six months from its storage facilities. Iranian and Western officials say Raisi’s rise is unlikely to alter Iran’s negotiating position. Two diplomats said they expected a break of about 10 days.
Additionally, oil prices have drawn support from forecasts of limited growth in U.S. oil output, giving the Organization of the Petroleum Exporting Countries more power to manage the market in the short term before a potentially strong rise in shale oil output in 2022.
On Friday, oil prices fell for a second straight session after the U.S. dollar soared on the prospect of interest rate hikes in the United States, but they were on track to finish the week little changed and only slightly off multi-year highs.
Spot trade was muted as traders’ awaited Nigerian official selling prices and August loading programmes. Around half a dozen cargoes from the July loading schedule are available.
India’s International Oil Company was said to have awarded its latest tender for August loading barrels to Shell taking Nigerian grades Bonga and Agbami.
Similarly, British Petroleum was offering Nigerian Qua Iboe at dated Brent plus $1.60 loading end July. Other grades have been driven up $1 a barrel recently by fresh European demand post lockdown.
The Federal Reserve last week suggested the possibility of rate hikes as early as 2023, which sparked a sell-off in equity markets as investors adjusted their portfolios in anticipation of the end of pandemic-era monetary policies.
Oil Prices Soar over Adjourned Iran Nuclear Talks
