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Oil edges up as rising demand faces Iran supply worries

CommoditiesMay 25, 2021 05:43PM ET
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© Reuters. FILE PHOTO: Pump jacks operate at sunset in Midland, Texas, U.S., February 11, 2019. REUTERS/Nick Oxford/File Photo

By Scott DiSavino

NEW YORK (Reuters) -Oil prices moved a shade higher on Tuesday as rising demand from the approach of the Northern Hemisphere's summer driving season and lifting of coronavirus restrictions mixed with worries that Iran's possible return to the market will cause a supply glut.

After gaining over 5% in the prior two sessions, Brent futures rose 19 cents, or 0.3%, to settle at $68.65 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 2 cents to settle at $66.07.

That was the highest close for both benchmarks in a week.

In post-settlement trade, Brent crude pared gains slightly and U.S. crude fell to $65.99 after trade group the American Petroleum Institute released weekly inventory estimates.

U.S. crude oil and fuel inventories fell last week, according to two market sources, citing American Petroleum Institute figures on Tuesday. Crude stocks fell by 439,000 barrels in the week ended May 21, the data showed, according to the sources, who spoke on condition of anonymity. API did not respond to a request for comment.

During the session, crude prices were supported by the decline in the U.S. dollar to a 19-week low versus a basket of currencies as inflation worries recede. A weaker dollar makes it less expensive for holders of other currencies to buy commodities priced in dollars, like oil.

The small price moves in oil came as the market waited for direction from weekly U.S. oil inventory reports that are expected to show U.S. crude inventories declined by 1.1 million barrels last week.

"Oil prices ... remain at high levels as the high season for oil demand is approaching and as restrictions are lifted in much of Europe and the United States," said Louise Dickson, oil markets analyst at Rystad Energy.

Parts of Europe and the United States are recording fewer COVID-19 infections and deaths, prompting governments to ease restrictions. However, in areas such as India - the world's third-biggest oil importer - infection rates remain high.

Indirect negotiations between the United States and Iran are due to resume in Vienna this week. Talks were resurrected after Tehran and the U.N. nuclear agency extended a monitoring agreement on the Middle Eastern country's atomic program.

Analysts have said Iran could provide about 1 million to 2 million barrels per day (bpd) in additional oil supply if a deal is struck and sanctions lifted.

"Crude prices are in wait-and-see mode until the fifth round of negotiations to revive the Iran nuclear deal are done," said Edward Moya, senior market analyst at OANDA, noting, "energy traders need to know how much Iranian crude is going to hit the market."

Any increase in supply from Iran would be on top of extra barrels already expected from the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, a group known as OPEC+, which plans to bring back about 2 million bpd of production through July.

"The extra barrels hitting international markets have served as a headwind for Brent, with the US Oil Fund (exchange traded fund) reporting inflows of $104 million on Monday, the largest inflow since August, serving as a tailwind for WTI," said Bob Yawger, director of energy futures at Mizuho in New York. A spokeswoman for USO (NYSE:USO) said the fund showed inflows of $100 million on Friday, and did not offer more recent data.

The premium of the Brent front-month over the same WTI contract fell to its lowest since November 2020 on Monday and held near that level on Tuesday, while the premium of the WTI front-month over the WTI second-month rose to its highest since February.

Oil edges up as rising demand faces Iran supply worries
 

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Comments (7)
Vlad Lozovskiy
Vlad Lozovskiy May 25, 2021 8:34AM ET
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All of a sudden leftists watching a price of oil with spreading comments like: "President doesn't control the price of oil"
Gorgovan Gabriel
Gorgovan Gabriel May 25, 2021 8:04AM ET
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can some one has a view abkut the price?
Kaveh Sun
Kaveh Sun May 25, 2021 2:04AM ET
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They have been selling their oil to China, Russian none stop in front of Biden. It doesnt make much different if santion lift.
Gene Kret
Gene Kret May 25, 2021 1:26AM ET
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The US doesnt run the show in the Iran matters and it doesnt hold influence like it once did! Tell the entire story!! The Middle East Cartels will and do dismis the US. The Middle East now views the US as a threat with all of the anti oil promotion and negative talk. The mighty influence is nothing more than a seat at the dinner table. Fact of the matter is that China and India have a bigger stake in the Middle East affairs because those will be the life support for the oil producers down the road.
Arash Taheri Lotfi
Arash Taheri Lotfi May 25, 2021 1:26AM ET
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I could not agree more. one part in your comment needs more research on your part, so that you would come to this conclusion that Iran never "dismissed" the sanctions. We, meaning the Obama's administration and the current administration made the so-called "sanctions" appear to be tough for the American news consumption while allowing Iran's oil exports to continue, using loopholes and contradictory language in the written full text of the "sanctions"
Rajesh Maurya
Rajesh Maurya May 25, 2021 12:57AM ET
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palm oil rate increass
Home Cinema
Home Cinema May 25, 2021 12:44AM ET
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Ready to go up 67 ;-)
Bhee Jay
Bhee Jay May 24, 2021 10:24PM ET
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really
 
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