Oil Ekes Out Minimal Gains as Iran Concerns Conflict With Surging Demand

Meanwhile, the U.S. is heading into a major summer oil squeeze: File Image/Pixabay

Two familiar and conflicting issues for crude traders - rising demand due to the global reduction of Covid cases, and the  possibility of Iran's return to the market - were said to be the reasons that oil eked out minimal gains on Tuesday.

Expectations were high that U.S. oil inventory reports would show crude inventories declining  by 1.1 million barrels last week, but this was tempered by indirect negotiations between the U.S. and Iran due to resume in Vienna this week-and analysts warning the Islamic republic could provide about 1 million to 2 million barrels per day (bpd) in additional oil supply if a nuclear deal between the two countries is struck.

As a result, Brent on Tuesday rose 19 cents to settle at $68.65 per barrel, while West Texas Intermediate rose a paltry 2 cents to settle at $66.07, still the highest closes for both benchmarks in a week.

Edward Moya, senior market analyst at OANDA, said, "Crude prices are in wait-and-see mode until the fifth round of negotiations to revive the Iran nuclear deal are done; energy traders need to know how much Iranian crude is going to hit the market."

Whatever the true amount is, it's substantial: according to estimates from E.A. Gibson Shipbrokers Ltd., Iran may be holding as much as 69 million barrels at sea, and theoretically floating barrels could reach most buyers within a few weeks, but Gibson believes it will likely take longer for the hoard to clear in practice.

In the U.S. at least, the talk is of an oil squeeze rather than surplus: according to Bloomberg data, the June-July WTI time-spread traded at 20 cents per barrel Tuesday, the strongest level since May 2020 and an indication "of the extreme tightness for U.S. crude supplies as shale producers stay cautious on production after last year's oil crash."

Bloomberg stated, "Meanwhile, demand for commodities is surging across the board amid a rebound for the world's largest economies."

Elsewhere, the decline of the Covid pandemic proved to be beneficial to Israel's Paz Oil, which on Tuesday announced earnings of an adjusted 30 million shekels ($9.3 million) in the first quarter, versus a loss of 97 million a year prior.

The company added that the recovery from the pandemic is also helping the refining sector.