Oil prices down after news of Iran’s potential return into global market
Oil prices dropped on Friday after major positive records during the week.
The situation was influenced by prospect of extra supply from Iran returning to the market which outweighed fears of a possible Russian invasion of Ukraine, that could disrupt supply.
Brent crude futures fell 68 cents, or 0.7 per cent to $92.29 a barrel extending a 1.9 per cent drop from the previous session while U.S. West Texas Intermediate (WTI) crude futures shed 67 cents, or 0.7 per cent to $91.09 a barrel, after sliding 2 per cent in the previous session.
Both benchmark contracts were headed for their first weekly fall in nine weeks after hitting their highest points since September 2014, with a deal taking shape to revive Iran’s 2015 nuclear agreement with world powers.
Diplomats said the draft accord outlines a sequence of steps that would eventually lead to granting waivers on oil sanctions. That would bring about 1 million barrels a day of oil back to the market, but the timing is unclear.
“Nevertheless, the spectre of a potential 1 million b/d hitting the oil market saw Brent crude oil prices come under pressure,” ANZ Research analysts said in a note.
Analysts do not expect prices to fall much in the near term, even with the prospect of a return of more Iranian oil, with the Organization of the Petroleum Exporting Countries and allies, together called OPEC +, struggling to meet their production targets.
“Oil markets are vulnerable to supply disruptions given global oil stockpiles are tracking near seven year lows and as OPEC+ spare capacity comes into question given disappointing OPEC+ supply growth,” Commonwealth Bank (CBA) analyst Vivek Dhar said in a note.
With oil demand also recovering as air travel and road traffic picks up, CBA sees Brent holding in the $90 to $100 a barrel range in the short term and topping $100 “quite easily” if tensions escalate between Russia and Ukraine.
U.S. President Joe Biden is set to host a call on Friday on the Ukraine crisis with the leaders of Canada, France, Germany, Italy, Poland, Romania, Britain, the European Union, and NATO, the office of Canada’s Prime Minister Justin Trudeau said.
