Crude oil started the week bullish on strong indications of increased summer driving season in the U.S and a pause in talks to revive the Iran nuclear deal that could indicate a delay in the resumption of supplies from Iran.
The Brent and the U.S oil (WTI) have risen for the past four weeks as a result of positive news surrounding the pace of global vaccinations and an increase in summer travel. The rebound has pushed up spot premiums for crude in Asia and Europe to multi-month highs, as reported by Investing.com.
Negotiations to revise the Iran nuclear deal paused on Sunday after Ebrahim Raisi won Iran’s presidential election. The election could delay the nuclear deal as Iran has insisted that U.S. sanctions placed on the newly elected President be removed before an agreement is reached. A deal could see Iran exporting an extra 1 million barrels per day, or 1% of global supply, for more than six months, from its storage facilities.
Another factor pushing the bullish narrative of oil prices is the forecast for limited U.S. output growth. The Organization of Petroleum Exporting Countries and allies (OPEC+) sources said last week that officials have heard from industry experts that U.S. oil output growth will likely remain limited in 2021 despite rising prices, giving the group more power to manage the market in the short term before a potentially strong rise in shale output in 2022.
What they are saying
Phillips Futures analyst, Avtar Sandu stated, “We expect strong demand and supplies to be tight”. He also added that investors were looking to the next meeting of the OPEC+ for supply outlook.
ANZ analysts stated in a note that, “The rebound in demand in the northern hemisphere summer is so strong that the market is becoming increasingly concerned about further sharp drawdowns on inventories.”
On the Iran front, CBA analyst, Vivek Dhar thinks that Ebrahim Raisi win is unlikely to derail efforts to revive the nuclear deal given the potential economic windfall for Iran if sanctions are lifted.
Brent crude oil is up 0.33%, currently trading $73.75 a barrel while U.S. Oil, West Texas Intermediate (WTI) is up 0.32%, currently trading $71.52 a barrel.