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Futures Movers: U.S. oil prices end lower, down from 2-year highs, on potential progress in Iran nuclear talks

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Oil futures retreated Tuesday, with U.S. prices down from their highest finish in more than two years, and global benchmark prices only briefly topping $70 a barrel for the first time since mid-March.

Prices touched fresh intraday lows after a tweet from BBC Persia implied progress in the Iran nuclear talks. A tweet from @bbcpersian translated to English using Google said that Mikhail Ulyanov, Russia’s envoy to the United Nations Security Council in Vienna, told BBC Persia that important news will probably be published by Wednesday.

Kasra Naji, a special correspondent for BBC Persian TV, tweeted that Ulyanov told him there has “been a significant development in the talks & there may be an important announcement tomorrow.”

In a tweet, Ulyanov appeared to push back against people interpreting his remarks as signaling a breakthrough, emphasizing that he had said “significant progress” had been made but that “unresolved issues still remain and the negotiators need more time and efforts to finalise an agreement on restoration of the JCPOA.”

Naji noted Ulyanov’s wording in a subsequent tweet:

U.S. oil prices had finished Monday at their highest in over two years, but the move has now been slowed in part by the “Iranian talk breakthrough rumors,” said Phil Flynn, senior market analyst at The Price Futures Group.

Talks between Iran and world powers are aimed at a return to the 2015 Iran nuclear deal to limit Tehran’s nuclear activities. A deal would likely lead the U.S. to lift sanctions on Iran, allowing the country to boost oil exports.

There’s some speculation that progress in the talks may be only related to International Atomic Energy Agency inspections, “which means the lifting of sanctions might still be way off,” Flynn told MarketWatch.

West Texas Intermediate crude for June delivery
CL00,
-1.10%

CLM21,
-1.10%

fell 78 cents, or 1.2%, to settle at $65.49 a barrel on the New York Mercantile Exchange after touching a fresh intraday low at $64.11. Prices settled Monday at $66.27, the highest front-month finish since April 23, 2019.

July Brent crude
BRN00,
+0.10%

BRNN21,
+0.10%

fell by 75 cents, or 1.1%, at $68.71 a barrel on ICE Futures Europe, after tapping a low at $67.28. In early Tuesday trading, prices had touched a high of $70.24. Front-month Brent contracts last traded above $70 on March 15, according to FactSet.

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Oil found support Monday from a “renewed focus on expectations for accelerating U.S. demand as many states reopen this week, likely supporting demand for refined products,” said Marshall Steeves, energy markets analyst at IHS Markit.

However, “demand growth remains under pressure in much of the world where the pandemic persists, and economies remain in various stages of lockdown,” he told MarketWatch.

Optimism over the further loosening of restrictions on activity in Western countries, including the U.S. and U.K., contributed to gains in oil prices over the past two trading sessions.

The U.S. saw a pandemic-era record for the number of air travelers, with more than 1.85 million people screened at its airports on Sunday, Bloomberg reported on Monday, citing data from the Transportation Security Administration.

However, a “possible stumbling block” to an oil rally is the “concern with the emergence of inflation in the U.S., which could be problematic until the Federal Reserve changes its monetary policy,” said Steeves. Also, “vaccinations in much of the world are slower than in the U.S., while there are increased cases of COVID in India and other parts of Southeast Asia.”

Meanwhile, the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, have implemented the first of three monthly production increases, Steeves said. In a report last week, OPEC “stuck to its prediction of a strong recovery in global oil demand this year, as its sees growth in the U.S. and China countering the COVID crisis in India.”

Steeves also pointed out that U.S. crude-oil production “could be on the rise in the coming weeks amid a rise in oil rig count.”

Read: Baker Hughes data show U.S. oil-drilling rigs up a second week

Weekly data on U.S. petroleum supplies will be released on Wednesday by the Energy Information Administration.

On average, analysts forecast a fall of 2.9 million barrels in domestic crude supplies for the week ended May 14, according to a survey of analysts by S&P Global Platts.

They also forecast an increase of 600,000 barrels in gasoline stocks, as the closure of the Colonial Pipeline disrupted shipments and “left product stranded on the U.S. Gulf Coast, S&P Global Platts said. Distillate inventories, which include heating oil, likely edged down by 200,000 barrels last week, the survey showed.

Back on Nymex, among the petroleum products, June gasoline
RBM21,
+0.13%

settled almost flat at $2.16 a gallon and June heating oil
HOM21,
-0.20%

fell 0.2% to nearly $2.06 a gallon.

June natural gas
NGM21,
-3.18%

settled at $3.01 per million British thermal units, down 3.1%, after posting a gain of 5% Monday on the back of a weather-related boost.

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