Oil Rally Stalls Again On Prospect Of Iran "Relieving" Tight Global Market

Meanwhile, one experts says a Russia/Ukraine conflict will boost oil to $120: File Image/Pixabay

Oil's rally continued to diminish somewhat on Wednesday, with prices closing below $90 per barrel due to the chance that a nuclear deal with Iran could help ease a global tight supply market.

Meanwhile, signs of strong demand continued to be reported.

West Texas Intermediate settled just 0.3 percent higher on Wednesday based on diplomatic enthusiasm from Vienna suggesting an impending breakthrough in negotiations with the Islamic republic.

The sentiment was strong enough for Louise Dickson, senior oil markets analyst at Rystad Energy, to remark, "Rising demand often comes hand-in-hand with upward price movements, but a long-awaited supply relief could be around the corner, helping to narrow the imbalance and cool market sentiment."

For some observers, that relief couldn't come sooner: the Energy Information Administration reported that U.S. crude stockpiles fell 4.76 million barrels and that the four-week average for oil product supplied - a gauge for demand - rose last week to a record high.

Ed Moya, senior market analyst at OANDA, said, "The oil market is too tight: the outlook for consumption continues to improve domestically and across Europe, which means that West Texas Intermediate crude might not have much resistance getting to the $95 region this month."

Moya's observations were supported by the rolling average for distillates consumption rising in the U.S. to the highest level since 2007 after back-to-back winter storms drove demand for heating and power generation in the Northeast.

Meanwhile, despite suggestions from some political leaders that Russia will not invade Ukraine, the former Soviet Union has moved 130,000 soldiers, tanks, missiles and even fresh blood supplies to the border, and strategist David Roche told media on Wednesday what the consequence would be if calamity occurs.

He said, "I think if there was an invasion of Ukraine and there were to be sanctions which impeded either Russia's access to foreign exchange mechanisms, messaging systems and so on, or which prevented them from exporting their commodities, either oil or gas or coal, I think at that point in time you would most certainly see oil prices at $120."

S&P Global Ratings stated in a special update to its global credit conditions outlook that the Russia/Ukraine and other geopolitical disputes "raise the risk of restricted trade and capital flows, and could weigh on economic growth," and that "even if an armed conflict is avoided, the disagreements between Russia and NATO over security concerns will likely persist."