Oil declines with return of Iranian supply hanging over market

Oil fell below $66 a barrel in New York as traders continued to assess if rebounding demand is strong enough to absorb potentially higher supply from Iran.

West Texas Intermediate has traded within a $10 range since March. Talks between Iran and world powers in Vienna are trying to revive a nuclear accord which could lift sanctions on the nation’s oil flows. It could bring additional output to the market just as the Organization of Petroleum Exporting Countries and its allies are also reviving some of their shuttered production.

Prices were lower on Thursday despite increasing evidence that US oil consumption is recovering as the pandemic fades. American drivers continue to travel almost as many miles on interstates as they did in 2019, while stockpiles of crude and gasoline fell last week. JPMorgan Chase & Co. analysts including Natasha Kaneva expect crude to hit $80 a barrel by the end of the year.

“The data has been supportive but there is currently no trend,” said Giovanni Staunovo, a commodity analyst at UBS Group, referring to oil’s tight trading range. “That seems to keep some sorts of investors away from the market.”

Prices

• WTI for July delivery fell 0.7 per cent to $65.74 a barrel at 8.52am in New York
• Brent for the same month lost 0.8 per cent to $68.32
  • The prompt timespread for Brent was 14 cents in backwardation, compared with 32 cents at the start of last week

OPEC+ ministers are due to meet June 1 to consider the state of the market and the group’s production policy. All but four of the 24 analysts and traders surveyed by Bloomberg News see the group affirming its plan to continue reviving output next month.

Besides potentially higher Iranian supply, the ministers will be also be assessing demand, including in the US The Memorial Day weekend at the end of May usually heralds the start of the summer driving season. But gasoline stockpiles are already low and are setting the stage for a supply squeeze typically only seen when a hurricane knocks out refineries, according to one fuel distributor.