Oil prices rose on Monday, supported by strong demand during the summer driving season. The Iran nuclear deal talks stalled, which marked a delay in restarting Iranian supplies.
Brent crude for August rose 23 cents, or 0.3%, to $73.74 a barrel as of 0622 GMT. West Texas Intermediate (WTI) crude was up 30 cents, or 0.4%, to $71.94 a barrel for July.
Both benchmarks have risen in the past four weeks, driven by optimism about the pace of global vaccines and an increase in summer travel. This recovery pushed crude oil’s spot premiums to multi-month highs in Asia and Europe.
The recovery in northern hemisphere summer demand is so strong that the market is increasingly worried about sharp drops in oil stocks.
Talks to revive the Iran nuclear deal stalled on Sunday after radical Ebrahim Raisi won the country’s presidential election.
The United States and Iran began their sixth round of indirect talks in mid-June on reviving the 2015 nuclear deal, from which former US President Donald Trump withdrew in 2018. Iran is an OPEC member whose revenue relies heavily on oil. Trump has imposed sanctions on Iran’s energy sector having world’s fourth-largest oil reserves. And depreved refineries in many countries from Iranian crude, and Tehran has been forced to pump crude well below capacity.
Analysts say Iran’s insistence on lifting US sanctions on Raisi before a deal is reached could delay the nuclear deal. Meaning that a break of about 10 days is expected.
Oil prices are supported by limited US production growth forecasts.
OPEC officials said last week that they had heard from industry experts that despite rising prices, growth in US oil production in 2021 will be limited, giving the group the strength to lead the market in the short term before a potentially strong rise in shale gas.
Demand is strong, supply is expected to be tight, and investors are focused on the next meeting of the Organization of the Petroleum Exporting Countries and its allies for a clearer view of supply.
Higher US refining processing rates front month WTI’s discount to Brent fell below $2 a barrel for the first time since November, limiting exports of US crude to global markets, analysts said.
U.S. oil rig counts, an early indicator of future production, rose eight last week to 373, the highest since April 2020, according to data from energy services firm Baker Hughes Co.
Iran is storing oil in tankers as it counts the days to enter the markets. Iran is preparing to quickly export the millions of barrels of oil it holds in tankers if it reaches an agreement with the United States on its nuclear program and restarts.
According to the oil ministry, Iran plans to increase production from the current 2.1 million barrels to 3.8 million barrels per day (bpd) once the administration of US President Joe Biden and the Iranian government agree on a deal that results in the lifting of sanctions.