By Barani Krishnan
Investing.com - Oil prices settled down more than 1% on Tuesday on selling driven by talk that Iran was on the cusp of a nuclear deal to end U.S. sanctions on its crude, before the Russian diplomat who made the news basically said he was misquoted.
The dollar’s plunge to three-month lows also helped limit losses in oil, which initially fell more than 2% on the day.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled down 78 cents, or 1.2%, at $65.49 per barrel. It earlier to a session low of $64.17.
London-traded Brent, the global benchmark for crude, closed down 75 cents, or 1.1%, at $68.71. Brent fell to as low as $67.30 intraday.
Oil tumbled initially on reports quoting Mikhail Ulyanov, Russia's permanent representative to the Vienna-based international organizations, as saying that "great progress" had been achieved on negotiations between Tehran and world parties for a nuclear agreement and "important news will likely come by tomorrow."
Ulyanov, however, denied later that a deal was in the cards. “I did not say there was any breakthrough in the Iran nuclear talks. There is significant progress, but issues remain,” he added.
Oil got a reprieve from selling after the Dollar Index, which pits the greenback against the euro and five other major currencies, fell to a session low of 89.68 — a trough since Feb. 25.
Iran has said previously that it could return “within months” to its peak oil production of nearly 4 million barrels a day once the sanctions on its oil — imposed by former U.S. president Donald Trump in 2018 — are lifted. Sources familiar with the country’s crude output currently estimated its production at around 2 million barrels daily.
Analysts say the additional supply from Iran, whenever that comes, will force a reconfiguration of global oil supply that could be more bearish than bullish — especially with questions about demand resurfacing after new coronavirus flare-ups in No. 3 oil consumer India.
Oil traders are also on the lookout for a weekly snapshot on U.S. oil supply-demand due from the API, or American Petroleum Institute.
The API snapshot, scheduled for release at 4:30 PM ET (20:30 GMT), will be released before Wednesday’s official report from the U.S. Energy Information Administration on supply-demand of petroleum products for the week ended May 14.
According to a consensus of analysts tracked by Investing.com, U.S. crude stockpiles likely rose by 1.6 million barrels last week, versus the drop of 427,000 barrels noted in the previous week to May 7.
Gasoline inventories likely declined by 886,000 barrels versus the rise of 378,000 in the prior week, consensus shows.
And stockpiles of distillates, made up of diesel and heating oil, likely contracted by 386,000 barrels last week after dropping 1.7 million barrels a week earlier.