Oil drops as Iran nuclear deal could be in sight
Oil fell on signs that an Iranian nuclear deal could be imminent, which could pave the way for a resumption of official flows from the Persian Gulf producer and ease tensions in the global market.
West Texas Intermediate fell more than 2% after closing above $93 a barrel on Wednesday. Iran’s chief negotiator Ali Bagheri Kani tweeted that efforts to restore the deal are “closer than ever” to a deal, although the US State Department was more circumspect. Tehran appears to be taking steps in Asia for its formal return to the market, with officials from state-owned National Iranian Oil Co. meeting with South Korean refiners to discuss potential supply.
Russia has insisted it is seriously considering easing tensions over Ukraine, but the United States has dismissed that claim, saying Moscow continues to build up military personnel near the border. An emergency summit of European leaders on the situation is scheduled for later Thursday. Moscow has repeatedly denied that it was planning an invasion.
Crude hit its highest level since 2014 this week as demand picked up and the Ukraine crisis added a risk premium. If an agreement with Iran is reached, it could lead to a resumption of exports without sanctions, thus increasing the world supply. Still, the obstacles to a deal remain high, with major differences over what is needed to roll back Iranian nuclear advances.
“Positive developments in the US-Iranian nuclear negotiations are helping to calm oil prices,” Rystad Energy AS senior vice president Claudio Galimberti said in a note. the talks as it could ultimately see up to 900,000 barrels per day of crude added to the market by December this year. »
Reintroducing Iranian shipments without sanctions, as well as clearing the crude Tehran has stockpiled, would chill a market that has been transfixed by the possibility of futures hitting $100 a barrel. Brent’s rapid spread — the difference between its two closest contracts and a strain gauge — narrowed to $2.12 a barrel in backwardation from $2.57 a day earlier.
There have been other signs this week that oil consumption has exceeded supply. On Wednesday, data showed inventories at the main U.S. storage hub in Cushing, Oklahoma, fell to the lowest since 2018. As of Brent, the price of cargoes bought and sold in the North Sea, hit $100.80 a barrel for the first time since 2014.
Energy consumption is increasing as economies recover from the impact of the pandemic. Europe is leaving anti-virus curbs behind, with Germany and Greece poised to become the latest countries in the region to ease regulations.
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