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Oil Hits 6-½ Month Low as Potential Iran Deal Spooks Market

Commodities Aug 16, 2022 03:03PM ET
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By Barani Krishnan

Investing.com -- Oil bulls wish that Iran would just go away. But the mullahs refuse to.

In what appears to be another European — surreptitiously U.S.-backed — attempt to revive the 2015 Iranian nuclear deal, crude markets are faced with the probability of an additional 1.3 million barrels per day of supply coming on to the market, at a time when demand doesn’t seem to be all that great.

Oil traders responded on Tuesday to the prospect of the additional supply in the way they knew best: sell.

“After 18 months of negotiations, progress has been made in reviving the Iran nuclear deal,” said Ed Moya, analyst at online trading platform OANDA. 

“We’ve been here before and have seen talks fall apart.  What is a little different this time is that it seems the Iranians are willing to discuss the terms. If the Iran nuclear deal is revived, that could send oil prices down to the low $80s.”

Tuesday’s plunge did not bring oil that low yet, though crude did visit fresh 6-½ month lows.

West Texas Intermediate, the benchmark for U.S. crude, settled down $2.88, or 3.2%, at $86.53 per barrel. It plunged to as low as $85.73 during the session, a bottom since the Jan. 26 low of $85.01.

Brent, the London-traded global benchmark for crude, settled down $2.76, or 2.9%, at $92.34. It earlier hit a session low of $91.72.

Some of Tuesday’s selloff was a hangover of Monday’s liquidation sparked by weak Chinese data and oil imports.

But by and large, the focus was on Iran as world powers, led by the European Union, discussed the possibility of reviving the 2015 nuclear deal with Tehran.

There was little known of the progress in the negotiations itself on Tuesday, as it would be in the case of anything where the “devil was in the details.”

For the record, the EU sent what it described as a "final" offer to Iran, after 16 months of fitful talks. It also said there was “nothing alarming” in the response from Iran, received late on Monday.

"For the moment, we are studying it and we are consulting with the other JCPOA participants and the U.S. on the way forward," an EU spokesperson said Tuesday, referring to the official abbreviation used for the nuclear deal.

Approval by the EU raises the chance of the Biden administration also accepting it – subject to the usual caveats of U.S. politics.

“A revival of the deal and lifting of oil sanctions could potentially see Iran increasing oil supply in the region of 1.3MMbbls/d over time,” said analysts at ING, in a note, “which would help to ease some of the expected tightness in the oil market over 2H23.”

Besides Iran, the market was on the lookout for weekly U.S. oil inventory data, due after market settlement from the API, or the American Petroleum Institute.

The API will release at approximately 4:30 PM ET (20:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended Aug 12. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.

For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 275,000 barrels, versus the 5.46-million barrel jump reported during the week to Aug 8.

On the gasoline inventory front, the consensus is for a decline of 1.1 million barrels on top of the draw of 4.98 million barrels seen in the previous week.

With distillate stockpiles, the expectation is for a build of 440,000 barrels above the prior week’s gain of 2.17 million.

Oil Hits 6-½ Month Low as Potential Iran Deal Spooks Market
 

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Comments (10)
Marco cuevas
Marco cuevas Aug 16, 2022 6:20PM ET
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Hear that algos "spooks" make sure you pick that up in this paid article.
Brad Albright
Brad Albright Aug 16, 2022 6:20PM ET
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Hey, I just spoke to the algos and they told me they did not hear you. They suggested you use all caps and emojis next time to better get their attention. And they said to tell you hello.
Brad Albright
Brad Albright Aug 16, 2022 5:16PM ET
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For all the know-nothings who would rather stick to their uniformed dogma than incorporate facts, and to those who want to sow doubt about the US, the United States of America is energy independent AND a net exporter of oil: https://www.forbes.com/sites/rrapier/2022/03/08/surprise-the-us-is-still-energy-independent/?sh=519389b530b6
jason xx
jason xx Aug 16, 2022 3:18PM ET
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Not spooking the gas market though
hiiah Huuah
hiiah Huuah Aug 16, 2022 3:14PM ET
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There will be no deal. And this marked is so manipulated. Dam this will hurt soon...
Jim Herndon
Jim Herndon Aug 16, 2022 2:37PM ET
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There has never been a group more hellbent on the destruction of America than the Democrats .This is tough to watch !
Show previous replies (2)
Barani Krishnan
Barani Krishnan Aug 16, 2022 2:37PM ET
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Nick Trimper  You're replying Jim, right? :)
jason xx
jason xx Aug 16, 2022 2:37PM ET
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I'd. iot I bet you would ****traitor trump off within 2 seconds of meeting him huh?
Nick Trimper
Nick Trimper Aug 16, 2022 2:37PM ET
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Barani Krishnan
Barani Krishnan Aug 16, 2022 2:37PM ET
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Nick Trimper  No worries and bests, mate.
Brad Albright
Brad Albright Aug 16, 2022 2:37PM ET
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Living in bizarre-o world.
Roger Miller
Roger Miller Aug 16, 2022 2:14PM ET
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The US and EU are desperate for any oil but their own or Russia’s. Groveling to Saudi Arabia didn’t work, so next is Iran.
Barani Krishnan
Barani Krishnan Aug 16, 2022 2:14PM ET
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Granholm tried talking to the API but its Frank Macchiarola along with Mike Wirth of Chevron and Scott Sheffield of Pioneer preferred to stick to their broken record of a "hostile administration" -- which seems to be exactly the same tree you're barking up at. Yes, this a green-friendly administration because that's what the people who voted for it wanted. You can't fault them for trying to deliver on that. It's like Trump. He was voted on the promise of tough immigration and that's what he tried to deliver despite many not liking it. True. this administration wasn't fossil-friendly to begin with -- and it was NOT supposed to be, based on its campaign promise. Yet, right after the Ukraine crisis broke, it has tried to encourage production with only one caveat -- that it not be on wildlife and other conservation areas. But the US oil lobby, instead of holding fast to the American spirit of competition, went the OPEC route of continuing to stifle output. So, here we are.
tim banks
tim banks Aug 16, 2022 2:14PM ET
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yea usa just producing 12 million barrels a month. near prepandemic highs
Adamo Nals
Adamo Nals Aug 16, 2022 2:01PM ET
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And why the *******are we dealing with Iran when we have 300 years of oil under our feet in this country? This is why he is the worst president in the history of the country. It’s a very simple fix. But he wanted to spend about another trillion dollars which is happening on climate change and IRS agents. Middle class going to get slammed. And we’re already on the precipice 97% of Americans dying on the vine financially. Barely can afford food with real inflation at 50 to 100%. Not 8.5% BS
Nick Trimper
Nick Trimper Aug 16, 2022 2:01PM ET
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from a strategic long term standpoint the finality of this world will rely on who has the most supply.....so we don't touch until needed.
tim banks
tim banks Aug 16, 2022 2:01PM ET
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we are expected to have record drilling. companies didn't ramp up because they want to return shareholders value. that's capitalism.
BD
BD Aug 16, 2022 2:01PM ET
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This is about preventing Iran from making nuclear weapons so terrorists don't nuke your ass. You comprehend?
Adamo Nals
Adamo Nals Aug 16, 2022 2:00PM ET
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No matter what when you have an administration at war with fossil fuel. WTI will eventually go to $150 easily. And this market is just any day now the Super Bubble is going to pop. It’s absurdity. I’ve listed all the reasons many times on here. I’ve done the math for the S&P 500. $215 a share times 14 X equals 3010. So we’re 1300 points overvalued right now. This fantasy land Hass to end. We have 1000 headwinds and zero tail wins. But the markets are acting like it’s the reverse.
Barani Krishnan
Barani Krishnan Aug 16, 2022 2:00PM ET
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Adamo Nois, see my reply to Roger Miller.
Crude Landman
Crude Landman Aug 16, 2022 2:00PM ET
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Times it by 18.86 and that is the reality meaning 4054.90
Brad Albright
Brad Albright Aug 16, 2022 2:00PM ET
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Please, invest as much money as you can based on your opinion of things. Put aside a little for a tent though, you are going to need it.
Crypto Current
Crypto Current Aug 16, 2022 1:53PM ET
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Iran, better go into goat farming.
Stephen Fa
Stephen Fa Aug 16, 2022 1:46PM ET
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A Biden deal on Iran sanctions wouldn't surprise me at this point
Barani Krishnan
Barani Krishnan Aug 16, 2022 1:46PM ET
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He hasn't done one after 20 months in office, just remember that.
 
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