Oil Price Prediction – Oil Retreats Amid Potential Progress On Iran Nuclear Deal

Key Insights

• Weak economic data from China indicates that demand for oil in the country may not be as robust as previously expected. 
• Iran says that it is working on a response to the EU’s “final” draft text on the nuclear deal. 
• Saudi Arabia indicates that it is ready to produce 12 million bpd if necessary. 

Multiple Negative Catalysts Hit Oil Markets

WTI oil gained strong downside momentum as traders reacted to weak economic data from China and news on Iran nuclear deal talks.

Iranian foreign minister said that the country would respond to the EU’s “final” draft text of the deal by midnight on Monday. The potential deal is bearish for oil markets as it will increase exports of Iranian oil.

However, it remains to be seen whether Iran is ready to agree to the European version of the deal. Previously, Iran stated that the deal could be revived if its “red lines” are respected. As usual, these “red lines” have not been made public, so traders are trying to guess whether the sides will be able to reach consensus in the upcoming weeks.

Saudi Arabia May Be Ready To Raise Output To 12 Million Bpd

Problems in China and the potential progress on the Iran nuclear deal are not the only bad news for oil bulls today. Saudi Aramco indicated that it was ready to raise production to 12 million bpd in case the Saudi Arabian government made such a request.

Saudi Aramco noted that it was confident that it could produce oil at such levels if necessary. Previously, Saudi Arabia produced 12 million bpd in 2020 during a short price war with Russia. It should be noted that markets have some doubts regarding the country’s ability to reach sustainable production of 12 million bpd.

A combination of bearish catalysts has pushed WTI oil back below the $90 level. The oil market remains in a downside trend, and WTI oil has a good chance to settle below multi-month lows and move towards the $85 level.

For a look at all of today’s economic events, check out our economic calendar.