Oil Down 3rd Straight Day as Iran Socks Crude Bulls With New Punch
Investing.com
Published May 20, 2021 03:01PM ET
By Barani Krishnan
Investing.com - Broad risk aversion and Asian Covid explosions aren’t oil bulls’ only ills. Crude prices fell 2% on Thursday, slumping a third day in a row, after a fresh punch from an old nemesis: Iran.
World powers negotiating to bring Tehran back into a nuclear accord canceled by former U.S. President Donald Trump have accepted that major sanctions imposed since 2018 on the Islamic Republic’s crude exports be lifted, President Hassan Rouhani told Iranian television.
“Finer points” were being worked on to finalize a deal, Rouhani said, even as European diplomats insisted that success was not guaranteed and that tough issues remain.
At stake is an additional supply of some 500,000 to 2 million barrels per day of crude that could enter the market anytime between the next three to 18 months, those in the know say.
Iran has said previously that it could return “within months” to its peak oil production of nearly 4 million barrels a day once the sanctions on its oil are lifted. Sources familiar with the country’s crude output currently estimated its production at around 2 million barrels daily.
Analysts say the additional supply from Iran, whenever that comes, will force a reconfiguration of global oil supply that could be more bearish than bullish — especially with questions about demand resurfacing after new coronavirus flare-ups in No. 3 oil consumer India.
West Texas Intermediate crude for July delivery, the benchmark for U.S. oil, settled down $1.41, or 2.2%, at $61.94 per barrel. It earlier fell to a 3-week low of $61.69.
July WTI lost 4.5% combined over two past sessions, bringing its week-to-date loss to 5.2%.
“I expect to see a test of $60 and possibly a squeeze down to $58,” Adam Button, a commentator on ForexLive, said referring to July WTI.
“If it falls below $58 there (is) a possibility of a double top targeting $48-$50. That's a tough number to believe but anything is possible in the oil market.”
Brent crude for July delivery, which acts as the global benchmark for oil, settled down $1.55, or 2.3%, at $65.11. Brent slid to a 3-week low of $64.81 intraday.
Week-to-date, Brent was also down 5.2%.
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