Oil futures made modest moves on Tuesday, but U.S. prices held near their highest in a week as traders kept an eye on developments in talks aimed at reviving the Iran nuclear deal.
Prices “still remain at high levels as the high season for oil demand is approaching, and as restrictions are lifted in much of Europe and the United States,” said Louise Dickson, oil markets analyst at Rystad Energy, in a market update.
The oil market has been “pricing in the last bits of trader pessimism, coming from the prospect of a nuclear deal with Iran, that will allow the sanctions-hit country to export more oil, adding to the global supply,” she said.
“However, the bearish fumes of the prospect of a nuclear deal with Iran may have run their course, as the reality of an extra 1 million bpd or more has been gradually priced in since diplomatic representatives began meeting in Vienna this year,” said Dickson.
West Texas Intermediate crude for July delivery rose 6 cents, or 0.1%, to $66.11 a barrel on the New York Mercantile Exchange after the front-monthn contract settled Monday at the highest since May 17.
Front-month July Brent tacked on 12 cents, or 0.2%, at $68.58 a barrel on ICE Futures Europe. August Brent crude the most actively traded contract, was off 9 cents, or 0.1%, at $68.46 a barrel.
Crude finished sharply higher on Monday as doubts emerged over the timing of any agreement that would see the U.S. return to the nuclear deal and lift sanctions against Iran, which would allow the country’s crude exports to return to the market. U.S. Secretary of State Antony Blinken on Sunday said the U.S. hasn’t yet seen whether Iran is “ready and willing to make a decision to do what it has to do” to have sanctions removed.
Iran over the weekend agreed to extend an agreement allowing the International Atomic Energy Agency to monitor its nuclear program for another month, but the window of opportunity for a deal ahead of Iranian presidential elections in June appears too small, said Eugen Weinberg, analyst at Commerzbank, in a note.
Despite Tuesday’s softer tone in the crude oil market, bullish analysts said the market would be likely to take in stride a return of Iranian barrels and continued tapering of production cuts by the Organization of the Petroleum Exporting Countries and its allies.
A prospective Iran deal is seen “as a headline risk rather than an overhaul to physical balances,” said Michael Tran, analyst at RBC Capital Markets.
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Between the Iran deal and the OPEC+ tapering schedule, “the two policy driven bearish hurdles are being cleared, and the market can revert to focusing on oil demand, the cycle ahead, and more quantifiable drivers that can be modeled,” he said in a note.
Back on Nymex, the June contract for gasoline edged down by 0.1% to nearly $2.12 a gallon and June heating oil shed 0.3% to $2.03 a gallon.
June natural gas which expires at the end of Wednesday’s session, traded at $2.90 per million British thermal units, up almost 0.4%.
The U.S. Energy Information Administration will release its data on petroleum supplies Wednesday, covering the week ended May 21. On average, analysts polled by S&P Global Platts forecast a fall of 2.2 million barrels in U.S. crude inventories, along with supply declines of 700,000 barrels in gasoline and 1.6 million barrels in distillates.