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Futures Movers: Oil prices up sharply as U.S. official raises doubt that Iran will comply with nuclear commitments

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Oil futures climbed Monday, finding support as a U.S. official said there aren’t yet any signs that Iran will comply with the nuclear commitments required to lift sanctions on the country, casting doubts that Tehran would soon be able to resume crude exports.

A lack of cooperation by Iran, as well as “skeptical comments about Iranian compliance” by U.S. Secretary of State Antony Blinken, both “lower the odds that a new agreement is reached and therefore, suggest sanctions are not likely to be lifted in the near to medium term,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

On ABC’s “This Week” with George Stephanopoulos, Blinken said the U.S. hasn’t yet seen whether Iran is “ready and willing to make a decision to do what it has to do” to have sanctions removed.

Talks between Iran and world powers have been continuing, with reports of some progress. Oil prices had posted declines for last week amid increasing expectations that a new nuclear deal would be reached, said Richey.

On Monday, West Texas Intermediate crude for July delivery
CL00,
+3.76%

CLN21,
+3.76%

rose $2.47, or 3.9%, to settle at $66.05 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since May 17, according to Dow Jones Market Data.

July Brent crude
BRNN21,
-0.01%
,
the global benchmark, added $2.02, or 3%, at $68.46 a barrel on ICE Futures Europe.

“It seems the Biden administration is having second thoughts about quickly lifting sanctions on Iran,” and there are “expectations for huge demand on the global re-opening trade,” said Phil Flynn, senior market analyst at The Price Futures Group.

“The biggest weight on oil has been the presumed return of Iranian barrels to the market,” he said in a daily report. “Any delay on sanctions lifting on Iran would be another bullish factor in a market that may need Iranian barrels to meet demand later this year.”

Iran informed the U.N. nuclear watchdog that it would extend a monitoring deal for a month, the International Atomic Energy Agency said Monday, according to news reports. The leader of Iran’s parliament on Sunday had announced that the monitoring agreement had lapsed, raising doubts about efforts to revive the Iran nuclear deal.

Indirect talks aimed at returning the U.S. to the nuclear accord and Tehran moving back into compliance with the deal have shadowed the oil market. An agreement would see the lifting of U.S. sanctions on Iran, returning a large source of crude supply to the market.

“If and when the U.S. rejoins the Iranian nuclear deal, this will likely hit sentiment in the oil market, however we are still of the view that the market will be able to absorb this additional supply, so would expect price weakness to be short-lived,” said Warren Patterson, head of commodities strategy at ING, in a note.

Meanwhile, U.S. benchmark stock indexes traded higher in Monday dealings after the Dow Jones Industrial Average
DJIA,
+0.54%

and the S&P 500
SPX,
+0.99%

logged back-to-back weekly declines.

“The general optimism about the economic reopening process, especially in the U.S.,” buoyed all risk assets Monday, “especially oil and refined products as traders look ahead to the unofficial start of the summer driving season with Memorial Day weekend coming up,” said Tyler Richey, co-editor at Sevens Report Research.

Back on Nymex, June gasoline
RBM21,
+2.41%

tacked on 2.4% to nearly $2.12 a gallon and June heating oil
HOM21,
+2.79%

rose 2.7% to $2.04 a gallon.

June natural gas
NGM21,
-0.69%

settled at $2.89 per million British thermal units, down 0.7%.

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