Oil prices take a breather after multiple market rallies
Oil prices have eased today ahead of the resumption of indirect talks between the US and Iran, which could revive the 2015 nuclear deal.
This could lead to the removal of sanctions on Iranian oil sales and boost global supplies.
Talks between both nations will resume on Tuesday in Vienna after a 10-day pause.
According to Reuters, the US has restored some sanctions waivers, while Iran is demanding a full removal of sanctions and a White House guarantee of no further punitive steps.
Brent Crude has dropped 0.61 per cent to at $92.12 per barrel, after hitting a seven-year high of $94 on Monday.
Meanwhile, WTI Crude is down 0.55 per cent, at $90.82.
Commerzbank welcomed the prospect of stabilising oil prices after multiple market rallies on both major benchmarks.
Analyst Carsten Fritsch said: “Oil prices are taking a short breather as the new week of trading begin. In our opinion, a somewhat more pronounced consolidation or even correction would be well overdue after seven weeks of rising prices.”
Craig Erlam, senior market analyst at OANDA, argued US President Joe Biden should be highly motivated to reach a deal with Iran to ease supply shortages in the market ahead of the mid-terms in November, which have contributed to seven year highs in oil prices.
He said: “Biden has an additional incentive to reach a deal, given the sky-high crude prices and what a deal could do to ease the tightness in the market just before the midterms. He’s tried a coordinated SPR release and let’s be honest, it achieved very little. This could make a real difference at a time when crude appears destined for $100 and OPEC+ can’t hit their output targets.”
OPEC+ has committed to conservative boosts to oil output, but has failed to hit production quotas over the winter, with multiple key members missing targets last month.
While potential breakthroughs between the US and Iran could weigh down oil prices, global demand remains resilient while ongoing tensions in Eastern Europe and cold US weather could result in further supply disruptions.
In the US, refineries in Texas were knocked out of production last week by a citywide power outage, as freezing temperatures from an Arctic cold front swept the Gulf Coast.
Biden has also warned Russia that the Nord Stream 2 pipeline will not go ahead if it invades Ukraine, raising the prospect of sanctions and supply shortages.
Meanwhile, in Saudi Arabia last weekend, Aramco revealed it had raised prices for all crude grades it sells to Asia in March from February, in line with market expectation.
This reflects firm demand in Asia and stronger margins for gas oil and jet fuel.