Oil Prices Rise Amidst Talks of Return of Iranian Supply
Oil prices edged higher on Friday, taking a break after three days of losses as investors braced for the return of Iranian crude supplies after officials said Iran and world powers made progress on talks to revive a 2015 nuclear deal.
Brent crude futures for July rose 10 cents, or 0.2%, to $65.21 a barrel by 0032 GMT
U.S. West Texas Intermediate for July was at $62.16 a barrel, up 22 cents, or 0.4%.
Both contracts are down nearly 5% and on track to post their biggest weekly loss since March after Iran’s president said the United States was ready to lift sanctions on his country’s oil, banking and shipping sectors.
Iran and world powers have been in talks since April on reviving the deal and the European Union official leading the discussions said on Wednesday he was confident a deal would be reached.
“While the ink is not yet dry and outstanding issues remain to be resolved, significant progress appears to have been made in the ongoing nuclear negotiations in Vienna and around 1 million barrels per day of additional Iranian barrels looks set to potentially hit the market in the back half of this year,” RBC Capital Markets’ Helima Croft
On the demand side, investors remain optimistic about the fuel demand outlook heading into the peak summer travel season due to accelerating COVID-19 vaccination rates in Europe and the U.S. However, the COVID-19 outbreaks in parts of Asia continue to cast a shadow on fuel demand.
Option bets on oil prices rising above $100 for the December 2021 Brent contract have jumped after last week’s surprisingly strong U.S. inflation data, with open interest on calls nearly tripling in May, JPMorgan analysts said. The bank’s forecast is for Brent to end 2021 at $74.
To reach $100, demand would need to average above 102.6 million BPD in the third quarter and grow to 103.6 million BPD in the fourth quarter, JPMorgan said, in the absence of any additional OPEC+ supply response.
Sultan Ahmed Al Jaber, chief executive of the Abu Dhabi National Oil Co, said on Thursday that oil demand has risen to 95 million BPD.
“A more aggressive ramp up in Iranian production and exports than expected would be yet another limiting factor on fundamentals pulling prices up towards $100/bbl alone,” JPMorgan
The bank expects Iranian crude and condensate production to rise to 3.2 million BPD in December, from around 2.8 million BPD in the first quarter, and only reach full capacity of 4.2 million BPD in early 2023.