The black liquid is down in the London session today, reversing some of its gains from Friday as investors noticed small steps forward in the US-Iran nuclear talks. However, the global supply of oil still remains tight as fuel demand increases.
The global benchmark, the Brent oil futures is down 0.56%, currently trading $92.75 a barrel, while the United States’ benchmark, the West Texas Intermediate (WTI) futures is also down 1.13%, currently trading $91.25 a barrel.
Both Brent and WTI futures rose more than $2 on Friday, recording a seventh consecutive week of gains as ongoing worries over supply disruptions continued to give the black liquid a boost.
What you should know
- The U.S. during the previous week restored sanctions waivers to Iran to allow international nuclear cooperation projects, as talks on the 2015 international nuclear deal enter their final phase. Should the sanctions on Iran be completely lifted, the country could boost oil shipments and add to global supply.
- Although the Iran talks are taking a step forward, macro-economic factors are still weighing on the price of oil. Members of the Organization of Petroleum Exporting Countries and its allies (OPEC+) are struggling to meet their quotas, despite pressure ongoing to raise production more quickly. In the U.S., although the rig count has been on an upward trend for a record consecutive 18 months, oil production is still far from pre-COVID-19 record levels.
- Tensions in Eastern Europe also remain, with U.S. White House national security adviser Jake Sullivan warning on Sunday that Russia could invade Ukraine within days or weeks but could still opt for a diplomatic path. Russia is the world’s second-largest oil exporter.
What they are saying
Nomura Securities senior economist Tatsufumi Okoshi told Reuters that, “Investors scooped up short-term profits on the news suggesting progress in the U.S.-Iran nuclear talks, but fresh buying kicked in again after the technical corrections as global supply is expected to stay tight.”
Fujitomi Securities Co. Ltd. chief analyst Kazuhiko Saito told Reuters that, “Other investors are expecting more twists and turns in the U.S.-Iranian talks and no agreement to be reached anytime soon. The market tone remained bullish, with investment bankers predicting Brent hitting $100 a barrel and global supply continuing to be tight with OPEC+ not reaching their output targets and the United States not raising output much.”