Oil Eases in Choppy Trade as Investors Await Clarity on Iran
Oil prices eased as broader financial markets weakened, while uncertainty about whether sanctions on Iran will be loosened or tightened injected choppiness into the session.
Prices whipsawed earlier in the session after Iran’s supreme leader expressed skepticism over discussions with the US, further denting expectations of an agreement on his country’s nuclear program. Ayatollah Ali Khamenei said he doesn’t think negotiations with the US will succeed and urged the Trump administration to stop “talking nonsense.” He added he doesn’t know what will happen in any discussions.
US West Texas Intermediate’s most-active July futures contract traded below $62 a barrel. Brent briefly jumped to touch $66 after the comments, before erasing gains to edge lower near $65 a barrel.
Oil prices have been volatile since last week on a host of contrasting headlines around the fate of Iran-US talks. A deal could pave the way for more barrels to return to a market that’s expected to be oversupplied later in the year, though Tehran has pumped at significantly higher levels under the current round of sanctions than previous ones.
Crude has rebounded this month, after sliding 19% in April, following an easing in the trade war between the US and China . However, any indication of a reduction of sanctions on Russia, or fellow OPEC+ producer Iran, could potentially add more barrels to a global market that is already facing a glut this year.
Adding to global uncertainty, US President Donald Trump is pulling back from his efforts to end the war between Ukraine and Russia.
Traders are “adopting a wait-and-see mode given conflicting news flows,” said Ole Hansen, head of commodities strategy at Saxo Bank. “Still somewhat concerned that we have seen most of the risk-on rally for now, with the potential for markets souring again, thereby adding some downward pressure on prices.”
Elsewhere, ConocoPhillips Chief Executive Officer Ryan Lance said he doesn’t think US shale output has peaked. Prices in the $50s on a sustained basis would lead to a slow decline, but in the $60s, output will just plateau, he added. Traders have been watching for signs of the effect of lower oil prices on US supply.
In bullish sign for prices, premiums of several refined fuels over crude have surged over recent weeks, potentially bolstering demand for crude oil.
Source: Bloomberg
