Oil prices were rising early on Friday and headed to a second consecutive week of gains after the U.S. signaled that there may not be an imminent announcement of an agreement for the United States and Iran to return to the Iranian nuclear deal.
As of 9:21 a.m. EDT on Friday, WTI Crude was nearing the $70 mark and traded at $69.51, up by 1.03 percent. Brent Crude was also rising and seeking to break the $72 threshold—it traded at $71.88, up 0.81 percent.
Oil prices have risen for most of this week amid signs of recovering demand in the United States and Europe, which have outweighed coronavirus concerns in parts of Asia, including India.
On Tuesday, OPEC+ confirmed its plan to ease the production cuts by 840,000 barrels per day (bpd) in July, suggesting that despite COVID setbacks in Asia, the alliance sees strong demand ahead with the start of the driving season. This sent Brent Crude prices topping $71 a barrel.
A large draw in crude oil inventories in the United States, a draw of 5.1 million barrels in the week to May 28, also boosted bullish sentiment on Thursday. Crude inventories in the U.S. are now at 3 percent below the five-year average for this time of the year.
On Friday, oil prices rose after the United States said there would be a sixth round of talks in Vienna regarding the Iranian nuclear deal, and possibly further rounds, which delays the timeline for Iran’s oil to return legitimately to the market.
“We expect there will be a sixth. I think there’s just about every expectation that there will be subsequent rounds beyond that,” U.S. State Department spokesman Ned Price said on Thursday, quoted by Reuters.
Commenting on the oil price movements this week, Saxo Bank said on Thursday:
“The bullish demand outlook presented by OPEC based on strong demand in Europe, China and the US has triggered renewed upside momentum, and from a technical perspective, today’s focus is whether Brent can break the four-time rejected area just below $72. If successful, the technical outlook points to $75 as the next target.”
By Tsvetana Paraskova for Oilprice.com
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The rise has nothing to do with the negotiations over Iran’s nuclear deal. This is so because even if US sanctions are lifted, Iran could only add 650,000 additional barrels a day to the market (b/d) being the difference between its pre-sanction exports of 2.125 million barrels a day (mbd) and 1.5 mbd under sanctions. A global economy growing at 6.3% this year, the fastest for many years, could easily absorb such a minuscule volume without even a whimper.
There are many economists who understand numbers and very few ones (including myself) who not only understand numbers but also trends in the market and what I describe as the psychology of prices and their behaviour when exposed to economic and geopolitical influences.
That is why the Iran factor will hardly impact prices because of my aforementioned explanation.
Furthermore, I have been or record saying since the Vienna negotiations started that a lifting of US sanctions on Iran may not see the light of day even by 2023 or ever. The reason is that the positions of the United States and Iran are irreconcilable.
Iran insists on a lifting of the sanctions first before it agrees to negotiate directly with the United States on the nuclear deal. On the other hand, the United States wouldn’t lift the sanctions or even ease them without an agreement on imposing strict limitations on Iran’s nuclear and ballistic missile development programmes which Iran will never ever accede to. This the United States supported by Israel and its Arab allies in the Gulf will never accept.
Iran’s position will harden further after the 18th of June Iranian presidential elections since supporters of the Islamic Revolutionary Guard Corps (IRGC) are going to have a landslide victory in the presidential elections. Furthermore, the IRGC and its supporters will do their very utmost to derail negotiations with the United States unless they get a deal on their own terms.
Brent crude oil price is projected to hit $70-$80 a barrel probably earlier than my previous projection of this happening in the third quarter of this year and average $67-$68 for the year with global oil demand returning to pre-pandemic level of 101.0 mbd by the middle of this year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Odd that New York State is not drilling for oil at this price same said be true of natural gas.
Winners: Ohio and New Jersey absolutely.