(Bloomberg) -- A week after the U.S. flagged tighter sanctions on Iranian crude and spurred oil higher, prices are back down to where they were before the announcement.
Investors are trying to assess how OPEC and its allies will respond when U.S. waivers that allowed buyers to continue importing Iranian oil expire on May 2. While the White House says other producers have pledged to make up for any shortfall, top exporter Saudi Arabia has been less emphatic. International Monetary Fund data show the kingdom needs crude at about $85 a barrel -- well above current levels -- to balance its budget this year.
Crude is losing momentum after surging to a six-month high following Washington’s announcement on the Iran waivers. There’s a “good chance” the Organization of Petroleum Exporting Countries and its allies will choose to extend their supply curbs through the end of the year when they meet in June, though some changes may be made to the current deal, according to BNP Paribas (PA:BNPP) SA. Meanwhile, U.S. President Donald Trump has renewed calls on the group to pump more.
“Oil stayed out of the limelight overnight following the Trump-induced sell-off on Friday,” Jeffrey Halley, senior market analyst at Oanda Asia Pacific Ltd. in Singapore, said in a note. Both WTI and Brent “have made a decent correction lower, and oil seems content to consolidate and adopt a wait-and-see attitude for now,” he said.
West Texas Intermediate for June delivery was at $63.46 a barrel on the New York Mercantile Exchange, down 4 cents, at 11:02 a.m. in Singapore. The contract closed 0.3 percent higher at $63.50 on Monday, snapping a three-session decline.
Brent for June settlement, which expires Tuesday, fell 12 cents to $71.92 a barrel on the London-based ICE (NYSE:ICE) Futures Europe exchange. The contract slipped 0.2 percent on Monday, after topping $75 last week. The global benchmark crude was at a premium of $8.46 to WTI. The more-active July contract was down 0.2 percent, dropping for a fifth session.
See also: What Oil at $100 a Barrel Would Mean for the World Economy
Saudi Arabia is facing a tricky task to balance the market at it needs to revive its economy, while at the same time trying to placate Trump. The global demand outlook is also still uncertain. The next round of U.S.-China trade talks gets underway in Beijing on Tuesday, with significant issues between the two sides still unresolved.
Most Asian stocks and currencies declined Tuesday as a drop in the first official gauge of Chinese manufacturing for April highlighted the fragility of the nascent recovery in the region’s biggest economy. Chinese markets will be closed for the rest of the week from Wednesday, while Japan is shut all week and doesn’t reopen until May 7.