Oil Rally Pauses As Iran Nuclear Talks Set To Resume

However, the global market remains tight and upside risks are high: File Image/Pixabay

Oil's remarkable rally paused on Monday, as traders contemplated the potential for more barrels from Iran flooding the market – and analysts suggested that last week's performance was overbought.

West Texas Intermediate settled down 99 cents at $91.32 per barrel and Brent settled down 58 cents to $92.69 per barrel, after it was announced that diplomats would return to Vienna Tuesday to resume Iran nuclear negotiations.

This comes on the heels of the U.S. restoring sanctions waivers to Iran to allow talks on the 2015 international nuclear deal to enter the final stretch.

Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said that crude futures "had a really good run at a time when the broader economy is not performing that way"; he described Monday's trading as the market taking a "pause to refresh."

However, the global market remains tight on supplies and predictions of $100 oil keep coming; Fiona Boal, head of commodities and real assets at S&P Dow Jones Indices, remarked, "Demand has been incredibly tight; I have been amazed - particularly in the U.S. - with the distillate demand.

"I would expect prices to remain around where they are, but there is definitely the risk to the upside."

Jeff Currie, global head of commodities research at Goldman Sachs, agreed: he told Bloomberg television, "Right now the upside risk in this market is exceptionally high…..the entire complex is extraordinarily tight….and what it means is that this market is incredibly vulnerable to any type of supplier demand disruption."

Yet another sign of a relentlessly bullish market occurred on Monday as Saudi Aramco raised oil prices for customers in Asia (where i it said demand was strengthening in particular), Europe, and the U.S. by 60 cents.

Also, PVM Oil Associates reported on Monday that derivatives that price crude for one week ahead (known as contracts for difference) are trading in the North Sea market at the highest level since at least 2006.

Keshav Lohiya, founder of consultant Oilytics Ltd., said,  "The more people we speak to, the common theme remains that they have never seen a tight market like this before."

Still, the relative strength index, a measure of momentum, shows the oil market is currently overbought and ripe for a pullback.