June 8, 2021
Oil prices settled on Tuesday at the highest in more than two years after the top U.S. diplomat said that even if the United States were to reach a nuclear deal with Iran, hundreds of U.S. sanctions on Tehran would remain in place.
That could mean additional Iranian oil supply would not be re-introduced into the market soon.
“I would anticipate that even in the event of a return to compliance with the JCPOA (2015 Joint Comprehensive Plan of Action), hundreds of sanctions will remain in place, including sanctions imposed by the Trump administration,” U.S. Secretary of State Antony Blinken said.
Brent crude rose 73 cents, or 1%, to close at $72.22 a barrel, the highest it has settled since May 2019. U.S. West Texas Intermediate oil rose 82 cents, or 1.2%, to settle at $70.05 a barrel, highest since October 2018.
“Blinken is looking at the reality of the situation and saying even if we do get a deal, there’s a long way to go,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “All those people expecting a flood of oil are going to be disappointed.”
The United States told Iran on Tuesday that it must let the U.N. atomic agency continue to monitor its activities, as laid out in an agreement that has been extended until June 24, or put wider talks on reviving the Iran nuclear deal at risk.
Barriers to the revival of Iran’s nuclear deal remain ahead of talks due to resume this week between Tehran and world powers, four diplomats, two Iranian officials and two analysts told Reuters.
In China, data showing China’s crude imports were down 14.6% in May on a yearly basis weighed on futures.
Crude prices have risen in recent weeks, with Brent up by nearly 40% this year and WTI gaining even more, amid expectations of demand returning as some countries succeed in vaccinating populations against COVID-19.
Restraint on supply by the Organization of the Petroleum Exporting Countries and allies has also helped buttress prices.
Meanwhile, U.S. crude oil production is expected to fall by 230,000 barrels per day (bpd) in 2021 to 11.08 million bpd, the U.S. Energy Information Administration (EIA) said on Tuesday, a smaller decline than its forecast last month for a drop of 290,000 bpd.
U.S. crude inventories have been drawing down and were forecast to drop for a third straight week, analysts said in a poll ahead of industry data from the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT), followed by the government’s report on Wednesday.
“The fundamental environment on the oil market remains favourable: fuel demand is recovering strongly not only in the United States, but also in Europe following the (partial) lifting of restrictions,” Commerzbank said.
There are still questions about the demand recovery’s trajectory.
In Britain, one of the most vaccinated countries in the world, there are now doubts that it will lift all coronavirus-related restrictions as previously planned on June 21.