Oil Falls as Potential for Fresh Iranian Supplies Adds to Gloom
Oil fell for a second day after President Donald Trump said the US and Iran are getting closer to a deal regarding Tehran’s nuclear program, a move that could unleash more supplies onto a market that is rapidly approaching a glut.
Brent was trading around $64 a barrel after losing as much as 4% in London. US crude futures also slid.
If all sanctions on Iran are lifted, about 300,000 to 400,000 barrels a day of additional crude could hit global markets, analysts estimated. The development adds further gloom to a market that is already swimming in additional supplies after OPEC+ revived output at a faster pace than anticipated and trade talks between the US and major consuming nations cloud the demand outlook.
“I think we’re getting close to maybe doing a deal,” Trump told reporters in Doha. But prices found some support because Trump’s latest rhetoric was more optimistic than that of Iran. Its lead negotiator, Foreign Minister Abbas Araghchi, on Wednesday urged the US to come to the next round of Oman-mediated talks with a “more realistic” approach. The date and location for those is yet to be decided.
“In less than 24 hours, the narrative has shifted from the US imposing new sanctions on Iran to growing speculation that a diplomatic breakthrough may be within reach,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management.
“If a deal is concluded, it would increase the likelihood of a significant oversupply later this year, especially when combined with the planned production increases from OPEC+,” he said.
Brent has averaged about $63 a barrel so far this month, the lowest price since 2021. The pullback will help soothe inflationary pressures in consuming economies but hits the coffers of major producers.
US shale companies have already reined in capital spending plans, and Saudi Arabia has lifted borrowing levels as the low prices show signs of biting.
Adding to the negative sentiment, the International Energy Agency said it expects global consumption growth to slow for the rest of this year as trade uncertainty puts pressure on demand.
“We’re seeing clear signs that the global economy is slowing and oil demand growth is slowing,” Toril Bosoni, head of the IEA’s oil markets division, said in a Bloomberg Television interview with Francine Lacqua.
Oil touched a four-year low during the depths of the trade tumult before mounting its biggest four-day gain since October after a détente was announced this week.
Prices remain down by about 13% this year thanks to the twin hit of trade uncertainties and faster-than-expected output increases by the Organization of the Petroleum Exporting Countries and its allies.
Brent for July settlement shed 2.2% to $64.65 a barrel at 10:05 a.m. in New York
WTI for June delivery fell 2.2% to $61.78 a barrel
Source : Bloomberg
