Oil Poised For Second Monthly Gain As Demand Optimism Outstrips Iran Worries

Meanwhile, Iran brags that its output can easily reach 6.5 million bpd: File Image/PixaBay

Long-standing fears of Iran flooding the global market with crude was all but dismissed on Monday as strong demand recovery continued to inspire traders and caused another welcome boost for oil prices.

Both contracts were set for a second monthly gain when Brent on Monday settled up 60 cents at $69.32 per barrel, and West Texas Intermediate rose 0.9 percent and last traded at $66.91 per barrel.

With regard to the Organization of the Petroleum Exporting Countries (OPEC) and allies meeting on Tuesday, Louise Dickson, oil markets analyst at Rystad Energy, said in a note, "Trading excitement often drives the market just before OPEC+ meetings, and there is confidence that the oil producer group will demonstrate supply restraint at its meeting on Tuesday."

But it remains uncertain what the cartel will decide: it believes the glut created during the pandemic has nearly gone, and that oil stockpiles will diminish rapidly in the second half of 2021 as lockdowns ease and international travel resumes.

This view is shared by many analysts, who also expect demand growth to outstrip supply despite the possible return of Iranian crude exports; Commerzbank referred to the rate of recovery around the world as "dynamic" thanks to the efficacy of the Covid vaccines.

For his part, Bijan Zanganeh, oil minister for Iran, told media on Monday that the Islamic republic's output can easily reach 6.5 million barrels per day (bpd) if U.S. sanctions are lifted.

He added that "Increasing Iran's oil production capacity increases Iran's security and political power.: oil is not just economic power."

As far as Mohammad Barkindo, secretary-general for OPEC, is concerned, Iran will have to toe the line with other producers: he signalled during OPEC's Joint Technical Committee that if a deal is worked out with the U.S., Iran's comeback "will occur in an orderly and transparent fashion," with no upset to the stability that other OPEC nations have struggled to achieve.

Still, Dickson noted that "Producers now have just as delicate of a task to bring back enough supply to match the swiftly rising oil demand; if markets over-tighten, a flare-up in prices could jeopardize the global economic recovery."