Oil Prices Steady as Expectations of More Supply Wane

By Adedapo Adesanya

Oil prices steadied on Tuesday after jumping more than 3 per cent at the previous session as investors softened expectations of an early return of oil exporter, Iran, to the international crude markets.

The Brent crude rose by 5 cents or 0.07 per cent to $68.51 per barrel, while the West Texas Intermediate (WTI) crude went up by 9 cents or 0.14 per cent to trade at $65.96 per barrel.

The United States and Iran are due to resume indirect negotiations in Vienna, Austria this week after the United Nations nuclear agency extended a monitoring agreement on the Middle Eastern country’s atomic programme.

Adding to the prospects of a push back was the United States saying it was not sure that Iran would comply with its nuclear commitments in order to have sanctions removed, even as ongoing talks have shown progress.

Analysts have said Iran could provide about 1 million to 2 million barrels per day in additional oil supply if a deal is struck and sanctions are lifted.

In addition, the increase in supply from Iran would be on top of extra barrels already expected from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), which plans to bring back about 2 million barrels per day of production through July.

However, the global recovery from the COVID-19 pandemic is giving a mixed outlook for oil demand especially as parts of Europe and the United States are recording fewer infections and deaths, prompting governments to ease restrictions, while countries like Japan and India, the world’s third-biggest oil importer, are recording high rates.

New coronavirus infections in India rose by 222,315, although the numbers have fallen off highs of over 400,000 earlier this month.

Also giving the market a positive outlook was a weaker US Dollar, which fell to a 19-week low. A weaker dollar makes it less expensive for holders of other currencies to buy commodities priced in dollars, like oil.

The US Energy Information Administration (EIA) will release its data on crude inventories on Wednesday, covering the week ended May 21. On average, analysts forecast a fall of 2.2 million barrels in US crude inventories.