By Adedapo Adesanya
Oil pulled back after hitting fresh multi-year highs of $72.27 per barrel on Monday, its highest since May 2019, as investors awaited the outcome of this week’s talks between Iran and world powers over a nuclear deal that is expected to boost crude supplies.
Yesterday, the Brent crude traded at $71.48 a barrel after it fell by 41 cents or 0.57 per cent, while the West Texas Intermediate (WTI) crude grade was sold at $69.24 per barrel after it dropped 38 cents or 0.55 per cent. At the session, the price rose to $70 for the first time since October 2018.
As talks advance between Iran and the world’s power, the primary concern is about Iranian barrels coming back into the market.
Both contracts have risen for the past two weeks as fuel demand is rebounding in the United States and Europe after governments loosened COVID-19 restrictions ahead of summer travel.
The parties in the nuclear discussions will enter the fifth round of talks on June 10 in Vienna, Austria and there would expectations that the United States will lift economic sanctions on Iranian oil exports.
While the European Union envoy coordinating the negotiations had said he believed a deal would be struck at this week’s talks, other senior diplomats have said the most difficult decisions still lie ahead.
Analysts expect Iran, which is having its presidential election on June 18, to increase its production by 500,000 to 1 million barrels per day once sanctions are lifted.
Apart from this, another factor that weakened the price yesterday was the data out of China, which showed that the largest oil importing nation’s crude oil imports fell to a year’s low in May by 14.6 per cent year-on-year.
Despite this, the Organisation of the Petroleum Exporting Countries (OPEC) continue to renew optimism by sticking to supply restraints through July.
On Monday, OPEC Secretary-General, Mr Mohammad Barkindo said OPEC and its allies, OPEC+ expect inventories to fall further in coming months.
Speaking at the virtual Nigeria International Petroleum Summit, the Nigerian said that oil stocks in developed nations fell by 6.9 million barrels in April, 160 million barrels lower than the same time one year ago.
“We expect to see further drawdowns in the months ahead,” he said.
OPEC+ decided in April to return 2.1 million barrels per day to the market from May through July and last week, they all decided to stick to that decision, leading to a rise in oil prices.
“The market has continued to react positively to the decisions we took, including the upward adjustments of production levels beginning in May this year,” he said.
India, which has contributed its share in dampening oil prices has also started to ease its latest lockdown as it recorded its lowest daily coronavirus infection numbers in two months as the nation grappled with a deadly second wave of the virus.