Oil surges more than 3% as fears over Iranian exports ease
Oil prices rose more than 3% on Monday as an increase in demand fueled by COVID-19 vaccination campaigns gave traders optimism that the market could soak up any Iranian oil that arrives on the market. market if Western negotiations with Tehran led to the lifting of sanctions.
NEW YORK: Oil prices rose more than 3% on Monday as increased demand fueled by COVID-19 vaccination campaigns gave traders optimism that the market can absorb any Iranian oil that comes in the market if Western negotiations with Tehran lead to the lifting of sanctions.
A drop in deaths from COVID-19 in India has also heightened expectations that demand for oil could increase in the coming weeks.
Brent crude oil futures stabilized at US $ 2.02, or 3%, at US $ 68.46 per barrel, while July US West Texas Intermediate closed at $ 66.05 US per barrel, up US $ 2.47, or 3.9%.
Prices were also boosted by expectations that a new deal with Iran is less likely than last week, said Bob Yawger, director of Energy Futures at Mizuho in New York.
“The Iranians and the Western powers cannot get the details that will sign and deliver this deal,” Yawger said.
Iran and UN nuclear watchdog extend recently expired surveillance deal by another month, both sides said on Monday, averting a collapse that could have led to broader talks on relaunching the deal Iran nuclear power plant of 2015 into the crisis.
Former President Donald Trump withdrew the United States from the deal in 2018 and reimposed the sanctions.
Even if large volumes of Iranian crude return to the market, the decline in global oil inventories is unlikely to slow, said Stephen Brennock of oil broker PVM.
“Tehran’s additional supply is about to be absorbed by the market following a surge in demand driven by vaccines in the coming months,” he added.
Goldman Sachs said the case for the price hike remained intact even with a potential increase in Iranian exports. His new baseline scenario for an October restart still supports a forecast of US $ 80 a barrel for this summer, he added.
“Even aggressively assuming a reboot in July, we estimate Brent prices would still hit US $ 80 per barrel in the fourth quarter of 2021,” the bank said in a note.
(Additional reporting by Noah Browning and Jessica Jaganathan; Editing by Marguerita Choy and David Gregorio)