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Oil prices slid early on Tuesday, as reports of the U.S. asking OPEC to lift oil production and hedge funds boosting their short positions added to bearish sentiment. Rising geopolitical concerns over Iran vowing to enrich uranium amid EU attempts to salvage the nuclear deal as well as heightened tensions in the Iranian-Israeli feud helped to boost prices in the afternoon.
At 09:16 a.m. EDT today, WTI Crude was down 0.05 percent at $64.72, while Brent Crude traded down 1.05 percent at $74.50. Brent prices touched their lowest in nearly a month, since May 8, the day on which the U.S. withdrew from the Iran nuclear deal.
Earlier on Tuesday, Bloomberg reported that the United States had quietly asked Saudi Arabia and several other OPEC nations to raise oil production by some 1 million bpd.
While the U.S. government has often expressed opinion against OPEC’s oil price-fixing policies, including a recent comment by President Trump, asking for a specific amount of oil production come online is a rare move.
Saudi Arabia and some of its close Arab allies in the Gulf, as well as the leader of the non-OPEC nations taking part in the production cut deal—Russia—are the only producers that have the spare capacity to increase production. So, in case of increased production from OPEC and allies, the potentially lower oil prices would hurt the other OPEC members that don’t have the spare capacity to boost output.
On the geopolitical front, Iran’s Supreme Leader Ayatollah Khamenei ordered on Monday the Atomic Energy Organization of Iran to “make the necessary arrangements to reach 190,000 SWU in the framework provided by the JCPOA.”
“Iranian nation & government will not stand being under both sanctions & nuclear restrictions. The Atomic Energy Organization of #Iran must immediately make the preparations for achieving 190K SWU-- for now within #JCPOA-- starting tomorrow,” a tweet from the leader’s Twitter account says.
The Prime Minister of Israel, Benjamin Netanyahu, tweeted, referring to Iran’s pledge to enrich uranium: “Ayatollah Khamenei, ruler of Iran, declared his intention to destroy Israel. Yesterday he explained how he would do this – with the unrestricted enrichment of uranium, to produce an arsenal of nuclear bombs. We are not surprised. We will not allow Iran to obtain nuclear weapons.”
The Iran-Israel spat continues to escalate while the EU, China, and Russia try to salvage the Iran nuclear deal. Meanwhile, analysts continue to speculate as to how much of Iran’s oil exports would be affected when the U.S. sanctions on Tehran return.
After oil prices rallied before the U.S. withdrawal from the Iran deal and immediately after it, prices snapped back two weeks ago as reports started to emerge that OPEC is considering stepping in to offset potential loss of supply from Iran and Venezuela.
Hedge funds and other money managers have reduced their bullish bets on oil prices in recent weeks, and shorts on U.S. oil last week were at their highest in six months, while short positions in Brent were at their highest since early August last year. Long positions in Brent dropped for a seventh week in a row, to the lowest since early last September.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.