The newest developments in the last-ditch negotiations to resurrect the 2015 Iran nuclear agreement, which would pave the door for increased Iranian crude exports in a competitive market, caused oil prices to decline in early trade on Tuesday.
The price of Brent oil futures decreased by 27 cents, or 0.3%, to $96.38 per barrel, erasing a 1.8% gain from the previous session.
After rising by 2% the previous session, US West Texas Intermediate (WTI) crude futures saw a 24 cent, or 0.3%, dip to $90.52 per barrel.
“The spectre of a U.S.-Iran nuclear deal continues to hover over the market,” ANZ Research analysts said in a note.
In anticipation of Washington and Tehran’s approvals, the European Union late on Monday put up a “final” draught to restore the 2015 Iran nuclear deal. A senior EU source predicted that the idea will receive a final judgement in “very, very few weeks.”
“While the details around the timing of the resumption of Iran’s oil exports remain uncertain even if the accord is revived, there is certainly scope for Iran to increase oil exports relatively quickly,” Commonwealth Bank analyst Vivek Dhar said in a note.
In six months, he claimed, Iran could increase its oil exports by 1 million to 1.5 million barrels per day, or up to 1.5% of the world’s supply.
“A revival of the 2015 nuclear accord will likely see oil prices fall sharply given that markets probably don’t believe a deal will be reached,” Dhar said.
However, after stronger-than-expected trade statistics from China over the weekend and the unexpected acceleration in US jobs growth in July, hints that demand may not be harmed as much as feared are keeping a floor under the market for the time being.
The American Petroleum Institute will release its weekly US oil inventory figures on Tuesday, followed by the Energy Information Administration on Wednesday.
In a Reuters poll of five analysts, it was predicted that in the week ending August 5, crude stockpiles will have decreased by about 400,000 barrels, gasoline stockpiles will have decreased by about 400,000 barrels, and distillate inventories, which include diesel and jet fuel, will have remained unchanged.