Oil Falls in Choppy Trading on Report US to Restart Iran Talks
Oil declined after Axios reported the US plans to restart nuclear talks with Iran, reducing the risk of another flare-up in the Middle East conflict.
West Texas Intermediate crude slumped as much as 1.4% to hit session lows below $67 a barrel after the news service said US Middle East envoy Steven Witkoff plans to meet with Iranian Foreign Minister Abbas Araghchi in Oslo next week. That followed an earlier statement from Iran’s top diplomat that the country would continue to engage with the UN’s nuclear watchdog.
Crude prices have been buffeted by geopolitical events in recent weeks, first surging after the escalation that included direct US strikes in Iran then declining after Tehran’s retaliation was dismissed as largely symbolic. Renewed negotiations over Iran’s nuclear program would further reduce oil’s already-diminished risk premium.
Oil’s slump on Thursday also may have been amplified by low liquidity ahead of Friday’s July Fourth holiday in the US.
The Middle East developments squelched some earlier strength in prices that was driven by US jobs data showing stronger-than-expected additions in June. Equity markets rose and the dollar gained, making commodities priced in the currency less appealing.
Oil had rallied on Wednesday against the backdrop of a market flashing pockets of strength. Diesel’s premium to crude in the US is the biggest in 15 months after stockpiles of the fuel continued to decline. Spreads on the nearest crude contracts are also pointing to tight supplies, with stockpiles at the key storage hub of Cushing, Oklahoma, sliding.
The continued outlook for supply dynamics, however, depends on a meeting between the Organization of the Petroleum Exporting Countries and its allies on Sunday. The group is largely expected to agree to a fourth significant oil supply increase, but may move back from the accelerated rate of production increases if prices dip into the $50-a-barrel range, according to Citigroup Inc.
“We believe we are on the brink of rolling into more structural softness over the next few months,” said Helge Andre Martinsen, senior energy analyst at DNB Bank ASA, led by a seasonal and structural decline in oil demand growth and OPEC+ continuing with its large output hikes.
In Canada, a wildfire emerged in the Fort McMurray area, about 12 miles (20 kilometers) from a major oil sands production site, offering a fresh reminder of the seasonal threat to the country’s supplies.
WTI for August delivery fell 0.7% at $66.96 a barrel at 11 a.m. in New York.
Brent for September settlement slipped 0.5% to $68.74 a barrel.
Source : Bloomberg
