Oil futures: Crude higher despite Iran deal seen nudging closer
Quantum Commodity Intelligence – Crude oil futures Wednesday were slightly higher, consolidating the week-long rally, which was revitalized Monday after comments from Saudi Arabia that it would consider production cuts due to what it said was a disconnect between futures and fundamentals.
Markets shrugged off various reports that an Iranian nuclear deal was getting closer, with US diplomats briefing there are still a number of hurdles.
Front-month October ICE Brent futures were trading at $100.67/barrel (1510 GMT), compared to Tuesday's settle of $100.22/b, although off from Wednesday's earlier high of $101.90/b.
At the same time October NYMEX WTI was trading $94.41/b, versus Tuesday's settle of $93.74/b.
Prices briefly dipped into negative territory after the Energy Information Administration reported US crude stocks last week dropped 3.3 million barrels, failing to match the steeper drop reported by the API. The EIA also said gasoline inventories were unchanged and distillates down 700,000 bpd.
The American Petroleum Institute reported late Tuesday that US commercial crude inventories fell by 5.6 million barrels last week, a figure above most expectations. Gasoline stocks posted a small build of 268,000 barrels and distillate inventories increased by 1.05 million barrels.
Oil was positive for much of the session, with comments from Saudi Arabia seemingly putting a floor under the market.
"Crude oil extended recent gains as the market faced the prospect of OPEC supporting prices through production cuts," said ANZ commodity strategist Daniel Hynes, commenting on steep gains since comments attributed to Saudi Minister Prince Abdulaziz bin Salman, which have seen prices rally by over $8/b from Monday's lows.
"Adding further support to prices, Kazakh oil exports may be disrupted for months due to damaged moorings," added Hynes.
Disconnect
The Saudi minister said the disconnect between oil benchmark futures and physical markets was sending misleading signals, which could warrant a production cut.
However, analysts said an immediate output cut is unlikely with the group set to increase quotas by a modest 100,000 bpd in September, but the wider OPEC+ group is expected to keep reductions as an option in the event of sanctions being lifting against Iran, or a sharp downturn in demand.
The US has cautioned that "gaps" remain between Washington and Tehran over a draft agreement to save the 2015 nuclear accord as President Joe Biden's administration weighs its response to Iran's latest negotiating position, reported the FT Wednesday.
"Gaps still remain, but should we reach an agreement to return to the deal, Iran would have to take many significant steps to dismantle its nuclear programme," said a senior administration official.
Iran said late Wednesday it had received a response from the US to the EU's "final" text for revival of Tehran's 2015 nuclear deal with major powers.
European natural gas prices resumed its upwards trend with the benchmark TTF price for Oct22 trading at fresh contract highs of over €300/MWh late Wednesday, up around 12% on the day, in part lifted by delays to the restart of US Freeport LNG terminal.
Forecasters said it looks like the Gulf of Mexico will make it through August without a tropical weather system becoming strong enough to be a named storm. The five-day outlook shows only a 20% chance of tropical storm formation.
