Crude Oil Slides After Hitting $70 as Supply Fears Heighten
By Adedapo Adesanya
Earlier on Tuesday, crude oil reached $70 per barrel, but fears that the market may soon be flooded with supply from Iran after making progress in its talks with the United States dragged the price downwards.
At the market yesterday, the Brent crude depreciated by $1.03 or 1.48 per cent to trade at $68.43 per barrel, while the West Texas Intermediate (WTI) crude lost 78 cents or 1.18 per cent to sell at $65.49 per barrel.
Prices of the black gold deflated after the market received information that “important news” would be released regarding the Iranian nuclear deal, the resolution of which could result in more Iranian oil barrels hitting the market.
A clarification was later made by Mikhail Ulyanov, Russia’s envoy to the Joint Comprehensive Plan of Action, known commonly as the Iran nuclear deal or Iran deal, saying that it was still “too early for a breakthrough”.
If the United States lifts sanctions on the gulf country, it could boost oil shipments, adding to global supply and the thought of more Iranian oil hitting the markets sent oil prices into the bearish territory.
Also adding to the bearish outcome on Tuesday was the American Petroleum Institute (API) report that there was a build in crude oil inventories of 620,000 barrels for the week ending May 14.
Analysts had predicted a build of 1.680 million barrels for the week.
In the previous week, the API reported a massive draw in oil inventories of 2.533 million barrels after analysts had predicted a draw of 2.817 million barrels.
Since the start of 2020, crude oil inventories have grown by more than 50 million barrels, according to API data.
This will then be confirmed by official government data from the Energy Information Administration (EIA) set to be released later on Wednesday.
Earlier in the session, global benchmark Brent oil hit $70 a barrel for the first time since March, lifted by expectations of demand recovery.
Britain further eased coronavirus restrictions on Monday and Europe is starting to reopen its economy, signalling improvement for oil demand.
Also in the largest oil-consuming nation, the United States, new cases continued to fall and New York lifted the mask requirement for vaccinated people.
Meanwhile, the market still continued to come under pressure from influences from Asia, as the coronavirus pandemic situation has increased. Singapore and Taiwan have reinstated lockdown measures and India has experienced a plunge in fuel demand after imposing restrictions to curb infections.