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Futures Movers: Oil end higher, lifted by upbeat economic data and little progress toward an Iran nuclear deal

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Oil futures ended higher on Tuesday, finding support as some economic data from China and U.S. suggest improved prospects for energy demand, and as discussions toward reviving the Iran nuclear deal made little progress.

Traders shifted attention away from last week’s decision by major producers to boost oil output to focus on talks that began Tuesday in an effort to bring the U.S. back to the 2015 Iranian nuclear deal, which would which would lead to a lifting of U.S. sanctions that have curtailed Iranian crude exports. Prospects for an agreement anytime soon, however, are dim.

The White House said it expects a “long process” to reach an agreement. The U.S. and Iran aren’t meeting directly, and representatives from European and other nations are serving as go-betweens instead. Through those intermediaries, the U.S. and Iran agreed to establish two working groups to try to get both countries back into compliance with the Iran nuclear deal, The New York Times reported Tuesday.

Read: What the Iran nuclear talks mean for oil prices

“As the possibility of a breakthrough in the talks fade, the likelihood of a pick-up in exports from Iran fades too, removing one risk from the oil market,” said Marshall Gittler, head of investment research at BDSwiss, in a recent note.

West Texas Intermediate crude for May delivery
CL.1,
+1.16%

CLK21,
+1.16%

rose 68 cents, or 1.2%, to settle at $59.33 a barrel on the New York Mercantile Exchange, below the session’s high of $60.90. June Brent crude
BRN00,
-0.03%

BRNM21,
-0.03%
,
the global benchmark, added 59 cents, or nearly 1%, at $62.74 a barrel on ICE Futures Europe.

Crude fell more than 4% Monday, with pressure tied to last week’s decision by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to relax output curbs. The plan would put more than 2 million barrels a day of production back on the market by July.

“The expectation that demand will revive quickly through the second quarter undergirds the OPEC+ production increase, that is to take place over the coming months,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch. “OPEC+ ministers appear to be anticipating a gradual recovery starting in May.”

Louise Dickson, oil markets analyst at Rystad Energy, meanwhile, pointed out that the market is now “signaling that it is ok” with the output decision and is “ready to benefit from the lack of uncertainty that a month-to-month update would have brought.”

“With a clearer view over global supply levels for the next few months, traders can now focus on more carefully pricing in demand side developments,” she said in a daily note.

On the demand side, there are some mixed signals Tuesday, she said, with lockdowns still weighing on oil market demand, but “positive economic data in China and the U.S. offer some service industry activity confidence.”

The Caixin China Services purchasing managers index climbed to 54.3 in March, rebounding from a 10-month low of 51.5, Caixin Media Co. and research firm Markit said Tuesday. A figure above 50 indicates an expansion in activity.

Data from the Institute for Supply Management Monday showed a survey of U.S. business leaders at service-oriented firms jumped to 63.7% last month from 55.3% in February.

Also, “the imminent lifting of Covid-19 restrictions in the UK offers hope to traders that oil demand for transport will increase a bit this month,” said Dickson.

Still, “Rystad Energy believes that a sustainable and sizeable demand comeback will only be felt from the second half of 2021, when vaccination campaigns reach a critical mass of inoculated people and countries are relieved from some of their ongoing restrictions,” she said.

Weekly data on U.S. petroleum supplies will be released late Tuesday by the American Petroleum Institute, followed by the Energy Information Administration Wednesday.

The EIA is expected to report a decline of 700,000 barrels in crude inventories for the week ended April 2, along with supply increases of 200,000 barrels for gasoline and 500,000 barrels for distillate.

In Tuesday dealings, May gasoline
RBK21,
+0.65%

rose 0.3% to $1.97 a gallon and May heating oil
HOK21,
+1.21%

added 1.2% to $1.79 a gallon.

May natural gas
NGK21,
-2.07%

settled at $2.46 per million British thermal units, down 2.2%.

In a report released Tuesday, the EIA forecast a more than 30% year-over-year rise in summer retail gasoline prices.

The higher price in 2021 “results from our forecasts of higher crude oil prices this summer and greater gasoline demand as the effects of the COVID-19 pandemic continue to subside and travel increases,” said Steve Nalley, the EIA’s acting administrator, in a statement.

The agency forecast an average retail price of $2.78 a gallon for regular unleaded gasoline in the April to September summer driving season this year, up from an average $2.07 for the summer season in 2020.

The EIA also raised expectations for WTI crude prices by 2.9% from the previous forecast to $58.89 this year and by 3.6% to $56.74 next year.

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