Oil prices came off their lows on Monday after a Tehran official indicated the Islamic Republic might miss another deadline in securing a nuclear deal integral to lifting Western sanctions on its crude exports. Crude futures had fallen nearly $2 a barrel earlier in the session on reports that Iran and world powers were closing in on a nuclear deal that would allow its oil to re-enter an over supplied market.
But Foreign Minister Mohammad Javad Zarif was quoted later by Iranian media as saying the talks will not be concluded on Monday as expected. "I think we're starting to see skepticism creep into the market that this is going to be a quickly done and dusted down deal," said Phil Flynn, analyst at Chicago's Price Futures Group brokerage.
Brent crude futures were down 30 cents at $58.43 a barrel by 1:10 pm EDT (1710 GMT), after plumbing a session low at $56.84. US crude futures were off 2 cents at $52.72, versus the day's low of $50.76. Tumbling gasoline futures, down nearly 3 percent, also weighed on the crude market. The fuel has directed action in US crude on many sessions over the past six weeks on signs of runaway demand for the peak US summer driving season.
In the case of Iran, although analysts said it would take until 2016 before oil exports resume fully from the state, an immediate rise of around 200,000 barrels per day in shipments was likely. The global crude market already has a 2.6 million bpd surplus. "It's all worries about supply now," said John Kilduff, partner at New York energy hedge fund Again Capital. "It just spells glut, no matter how you look at it." Oil also pared some losses after European Council President Donald Tusk said euro zone leaders had "unanimously reached agreement" on a deal for Athens. Greek Prime Minister Alexis Tsipras said the debt restructuring and medium-term financing deal was worth 35 billion euros ($38.7 billion).
Even so, several banks lowered their oil price forecasts, factoring in the supply ample and growing economic risks. Bank of America Merrill Lynch said US crude prices "could soon drop well below our $50 per barrel target" for the third quarter. Commerzbank said a fall below $55 per barrel in Brent and below $50 per barrel in US crude was "conceivable".
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