Oil Dips On Iran Fears But Brent Breaks $70 On Demand Recovery

Analysts doubt that relations with Iran will be repaired anytime soon: File Image/Pixabay

A demand concern lurking in the shadows for crude traders these past few weeks assumed fuller status on Tuesday when Mikhail Ulyanov, ambassador for Russia to the United Nations, said significant progress had been made on reviving the nuclear deal between the U.S. and Iran - and as a result, oil prices dipped.

Traders, worried that such a deal would cause Iran to add to global supply by boosting oil shipments, caused Brent to settle down 75 cents at $68.71 per barrel; West Texas Intermediate settled down 78 cents to $65.49.

However, it's worth noting that earlier on Tuesday Brent topped $70 per barrel in London for the first time since mid-March, due to rising consumption that has all but eradicated the stockpile glut caused last year at the height of the Covid lockdowns.

Giovanni Staunovo, commodity analyst at UBS Group, noted that $70 oil, along with a surge in prices of other commodities, are the latest signs of a global economy that is starting to see inflationary forces at work, as well as demand.

Taking the long view of the oil market on Tuesday was an optimistic Edward Moya, senior market analyst at OANDA, who said, "The crude demand recovery story during the second half of the year still supports much higher oil prices by the end of the year, with this Iran news possibly shaving a couple of dollars off most analysts' end-of-year targets."

The reason for the positive outlook continues to be the Covid vaccination rollouts: Britain further eased coronavirus restrictions, European cities and beaches are reopening, and New York is joining many other U.S. states in lifting the mask requirement for vaccinated people.

As for Tuesday's focus on a fruitful U.S. Iran deal, Tom Finlon, analyst at Brownsville GTR, said, "The devil is in the details"; despite "periodic comments on progress," talks have been at "an impasse on substantive issues, so it's not going to be that easy."

Meanwhile, a vital communications system at the Colonial Pipeline was restored after an outage earlier Tuesday temporarily left customers in the dark about fuel shipments; the infrastructure is still on track for a full recovery of operations by this weekend.