Crude values rebound as Iran nuclear deal looks doubtful in the near-term

Front-month ICE Brent has increased by $2.74/bbl on the day from Friday, to $93.68/bbl at 09.00 GMT.

PHOTO: Several European nations doubt that Iran really wants to meet key US demands to revive the 2015 nuclear deal. Getty Images

Upward pressure:

It now seems less likely that Iranian crude oil will return to the global market anytime soon, at least not before the US mid-term presidential elections next month, Reuters reports citing comments from an Israeli official.

Late last week, France, Germany and the UK said they had “serious doubt” over whether Iran really intends to revive the nuclear deal. They alleged that Iran is still unwilling to drop its demand for the UN to close its probe into Iranian uranium enrichment programmes.

Nigeria’s August crude oil production fell to 972,000 b/d in August, the lowest in 25 years, according to data from the Nigerian Upstream Petroleum Regulatory Commission. Industrial-scale theft from Nigeria's oil pipelines has negatively impacted the country's oil revenue and production, Nigerian President Muhammadu Buhari said.

Nigeria's oil production peaked at 1.40 million b/d in January this year and has tailed off since. Its August production was just over half of its monthly quota of 1.80 million b/d set by OPEC. Less crude oil production from Nigeria has combined with sanctions and shunning of Russian oil to weigh on OPEC’s total production levels for several months.

Downward pressure:

Recession fears continue to weigh heavily on market sentiment as economies around the world back inflation-controlling measures. The European Central Bank (ECB) raised its interest rate by a 75 basis points last week. The ECB said it expects to raise the rate further over the coming months as it seeks to rein in soaring inflation levels. 

Similarly, US Federal Reserve Chairmen Jerome Powell said last month that the Fed could impose more large interest rate hikes over the coming months to curb rising inflation. Interest rate hikes typically push the US dollar up and make Brent and other commodities priced in dollars more expensive to buyers.

Covid-19 restrictions in China could cut its demand for jet fuel and road fuels like gasoline and diesel by 380,000 b/d to 8.09 million b/d this year, Reuters reports citing Energy Aspects analyst Sun Jianan. This would be the first demand drop in two decades.

Several market participants think there was lower-than-usual Chinese demand for gasoline during last weekend's Mid-autumn festival, as Covid-19 restrictions prompted people to stay indoors and avoid travel.

By Nithin Chandran

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