Iranian Foreign Minister Abbas Araghchi has highlighted “many opposing and contradictory positions” coming from U.S. negotiators. This uncertainty pushed Brent crude prices up by as much as 1.1% before they fell back below $65 per barrel. Meanwhile, West Texas Intermediate (WTI) crude was trading near $61 per barrel. Earlier in the week, oil prices had dropped after U.S. President Donald Trump suggested that the two sides were close to reaching a deal.
Potential Impact of a Deal on Oil Supply
If a deal between the U.S. and Iran is finalized, Iran could increase its oil exports, but only to a limited extent. Sanctions relief might allow Iran to add around 200,000 to 300,000 barrels per day to the market. However, this would come at a time when the global market is already preparing for a supply surplus.
The International Energy Agency (IEA) reaffirmed on Thursday that it expects new oil production this year and next, combined with the return of previously shut-in OPEC+ output, to exceed demand growth. This imbalance could lead to a global oversupply.
Robert Rennie, head of commodities and carbon research at Westpac in Sydney, said, “We wouldn’t overstate the impact on Iranian supply — the deal could increase Iranian exports by 200,000 to 300,000 barrels a day, but that’s not a huge increase. We continue to believe Brent should remain in the $60 to $65 range over the coming weeks.”
Oil Prices Supported by Growing Demand Despite Headwinds
Oil prices look set to rise for a second consecutive week. This is supported by expectations of stronger demand from the United States and China, the world’s two largest crude consumers. The recent easing of trade tensions between these countries has added optimism to the market.
Despite this, oil prices remain down more than 10% for the year. The decline has been driven by two main factors: ongoing trade uncertainties and a faster-than-expected increase in oil production from OPEC and its allies.
Market Signals Point to Bearish Sentiment
Parts of the oil futures curve remain in contango, a situation where near-term contracts trade at a discount compared to contracts further out. This pattern is generally seen as bearish, indicating expectations of lower prices in the short term.
The spread between Brent’s two nearest December contracts has reached its most negative level in over a week. This reflects market caution amid the ongoing uncertainty around supply and demand.
Related topics:
