Oil futures: Brent down 2.5%, poised for lowest close in 5 weeks

London (Quantum Commodity Intelligence) – Brent futures were poised to end at their lowest finish in more than five weeks on Thursday on a cocktail of an increasing likelihood of Iranian supply, Covid-19 worries in Asia and inflation concerns.

By time of press the front month futures contract was valued at $64.90/b, down 2.6% on the day after opening flat at $66.30/b

It was a bear day all day with the contract sliding in choppy trade, crashing through the 50-day moving average after breaching the 10- and 20-day moving averages on Wednesday.

At the same time Jul WTI was trading $61.95/b, $2.23% down from Wednesday's settle of $63.36/b.

Prices are now down by around 7% since Tuesday, when Brent briefly traded above $70/b.

The move south resisted a weaker dollar and a more broader risk-on day where key equity indices rallied 1% either side of the Atlantic.

US and Iranian negotiators hope to hold a final round of talks in Vienna next week on the terms of Washington's re-entry to the nuclear deal.

Such a pact could see an additional 1-1.5 million barrels a day hit the global market later this year at a time when many Asian countries are restricting movement to battle Covid-19 outbreaks.

Spiraling coronavirus cases and travels restrictions across Asia also drove bearish sentiment, particularly for India, where oil demand has slumped in recent weeks.

On Thursday, India's biggest refiner, the Indian Oil Company said run rates were down more than 12 percentage points in May compared to April on collapsing demand - the first official confirmation that refinery runs were down.

However, the extent of the impact of Iranian oil barrels into the market needs to be weighed against the International Energy Agency's forecast of supply shortages in the second half of the year and a European and US vaccination programme that aims to kickstart the western economies.