Oil Price Fundamental Daily Forecast – Iran Supply Worries, Asia Demand Concerns Exerting Short-Term Pressure

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures face a third session of losses on Thursday as news about a possible resolution to the U.S.-Iran impasse continue to weigh on prices. According to reports, diplomats said progress was made towards a deal to lift sanctions on Iran, which could boost crude supply.

At 12:22 GMT, July WTI crude oil is at $62.53, down $0.82 or -1.29% and July Brent crude oil is at $65.74, down $0.92 or -1.38%.

Imminent US/Iran Deal?

European powers, the United States and Iran have made progress in talks over Tehran’s nuclear program that could result in sanctions on Iranian oil being lifted, Reuters reported. The European Union official leading the talks said on Wednesday he was confident a deal would be reached as the negotiations adjourned.

Indian refiners and at least one European refiner are re-evaluating their crude purchases to make room for Iranian oil in the second half of this year, anticipating that U.S. sanctions will be lifted, company officials and trading sources said.

“With global oil demand growth projected to be healthy for the balance of this year and in 2022 the (OPEC+) producer group is in a relatively comfortable position to deal with increasing Iranian output without undermining the oil rebalancing,” PVM analysts said.

Other Bearish Factors

Concerns about the demand outlook in Asia also weighed on prices with almost two thirds of people tested in India show exposure to the coronavirus. The country also reported a plunge in fuel demand after imposing restrictions to curb infections.

Singapore and Taiwan have reinstated lockdown measures. Singapore warned on Sunday that the new coronavirus variants, such as the one first detected in India, were affecting more children, as the city-state prepares to shut most schools from this week and draws up plans to vaccinate youngsters.

Uncertainty Over Mixed Government Inventories Report

Some traders said the report was bearish, while others saw it as friendly as crude inventories rose, while gasoline and distillate stockpiles fell.

The U.S. Energy Information Administration (EIA) reported crude inventories rose by 1.3 million barrels the week-ending May 14, against analysts’ expectations in a Reuters poll for a 1.6 million-barrel rise.

Gasoline stocks were down by 2 million barrels, compared with predictions of an 886,000-barrel fall. Gasoline product supplied, a measure of demand, rose 5% to 9.2 million barrels per day, though this included follow-on demand from the Colonial Pipeline shutdown.

Daily Outlook

Although prices are under pressure, I don’t expect to see a change in the major trend to down. Traders are looking for value in a market that may have risen too far, too fast. After a new support base forms, the rally should resume.

The market will eventually adjust to the new Iranian supply. OPEC+ may even have to make adjustments. Any drop in demand in India or other parts of Asia will also eventually be offset as vaccinations increase.

Swiss bank UBS said it expected oil inventories to fall to pre-COVID levels by mid-year with an oil price of $75 a barrel in the second half.