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Futures Movers: Oil rises, but on track for weekly loss on developments in Iran nuclear talks

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Oil futures climbed Friday, poised to recoup losses from a day earlier, but remained on track for weekly losses as investors pointed to signs of progress toward a restoration of the Iran nuclear deal, which could eventually push more supplies onto the crude market.

For now, “traders are effectively setting aside Iran’s comments, where it alleged to have made progress in a nuclear deal,” said Manish Raj, chief financial officer at Velandera Energy.  

A U.S. Department of State spokesperson said on Thursday that “many challenges” remain, according to S&P Global Platts.

Those comments make Iran’s statements “appear more of political posturing rather than material facts,” said Raj. Crude is reversing Thursday’s losses as it “sees ‘smoke and mirrors’ in Iran’s statements.”

Meanwhile, the “positive mood” for oil Friday is also supported by the “improving situation in India, as the partial lockdowns appear to be short lived,” Raj said. Still, “India remains on everyone’s watchlist, and developments from India will dictate near-term price direction for oil.” India is the world’s third-largest energy consumer.

West Texas Intermediate crude for July delivery
CL00,
+2.91%

CLN21,
+2.92%

was up $1.60, or 2.6%, to $63.54 a barrel on the New York Mercantile Exchange, following a loss of 2.2% on Thursday.

July Brent crude
BRN00,
+2.29%

BRNN21,
+2.29%
,
the global benchmark, advanced $1.43, or 2.2%, to $66.54 a barrel on ICE Futures Europe, looking to recover much of Thursday’s 2.3% decline.

U.S. benchmark WTI oil was on track for a weekly fall of 2.8%, based on the front-month contracts, while Brent crude was down over 3%.

A “general correction” in previously highflying commodity prices in recent days is one key reason for the overall weakness in crude, said Carsten Fritsch, analyst at Commerzbank, in a note.

He believes the “possible return of Iranian oil exports is weighing on prices,” with the talks currently under way to revive the 2015 international nuclear agreement (JCPOA) “apparently making good progress.”

The European Union diplomat shepherding negotiations over the deal expressed confidence that an agreement would be reached as the latest round of discussions concluded earlier this week. Iranian President Hassan Rouhani on Thursday said the U.S. was ready to lift sanctions, though there was no confirmation from the U.S. Rouhani was contradicted by a senior Iranian official, according to Reuters.

“If the oil sanctions imposed on Iran were indeed to be lifted, up to 2 million barrels of additional crude oil per day could flood the market,” Fritsch said.

He noted that Iran exported 2.2 million barrels of crude oil per day on average between April 2016 and July 2018, before the U.S. withdrawal from the JCPOA and the subsequent reinstatement of sanctions by the Trump administration caused Iranian oil exports to decline to just a few hundred thousand barrels per day.

Additional Iranian oil exports would roughly equal the supply deficit projected by the International Energy Agency in the fourth quarter, he said. As a result, the Organization of the Petroleum Exporting Countries and its allies would have no need to further expand output to prevent a tightening of the market.

On Nymex, petroleum products climbed along with oil prices, with June gasoline
RBM21,
+1.50%

up 1.2% at $2.07 a gallon and June heating oil
HOM21,
+1.35%

up 1.3% at $1.99 a gallon. Both contracts traded over 2% lower for the week.

June natural gas
NGM21,
-0.72%

traded at $2.91 per million British thermal units, down 0.4% for the session, with prices poised for a weekly loss of 1.6%.

Hurricane season in the Atlantic, which can lead to disruptions in energy production and refining in the Gulf of Mexico region, will officially begin on June 1. The National Oceanic and Atmospheric Administration said Thursday that it predicts another “above-normal” Atlantic hurricane season, but experts do “not anticipate the historic level of storm activity seen in 2020.”

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