Iranian Negotiations and API Inventory Push and Pull Oil Prices

Oil prices continue to tumble on Monday as news that negotiations with Iran are moving along positively. Crude oil drifted as low at 91.81 and is trading at 92.76 this morning. Under the deal initially reached in November, Iran agreed to curb parts of its nuclear drive for six months in exchange for receiving modest relief from international sanctions and a promise by the so-called P5+1 — Britain, China, France, Russia, the United States plus Germany — not to impose new sanctions against its hard-hit economy. This will give both sides time to come up with a more comprehensive solution to the dispute.

Tehran has been subject to painful international sanctions aimed at bringing to an end its nuclear programme, which the West claims is being used to develop atomic weapons. Iran vehemently denies the claims. The Islamic republic, a member of the OPEC cartel, pumped 2.8 million barrels of crude in December, according to data from the US Energy Information Administration. Brent oil recovered 15 points to trade at 105.45 recovering 15 cents after this week’s major price decline.

Crude oil fell further in early Tuesday trade as expectations of a return of Iranian crude supplies to the market, as well as forecasts of increased production in the United States and United Kingdom, weighed on sentiment for the contract. Oil prices recovered in late trading on Tuesday after the API weekly report showed a larger drop in inventory that previous expected.  API on Tuesday said that weekly crude stocks fell by 4.1 million barrels with a nominal build at the benchmark delivery point in Cushing, Oklahoma Libya’s Prime Minister Ali Zeidan said on Tuesday the government would give mediators a chance to end a standoff with protesters blocking eastern oil ports, seeking a peaceful solution even after an escalation of the dispute over crude exports. Crude oil prices are expected to move higher for the day as lower crude oil inventories expectation can push the prices higher.

However, the agency also added gasoline supplies climbed by 5.4 million barrels while distillate inventories declined by 1.7 million barrels. Support came from the fact that distillate stocks which are closely watched in the winter season fell by 1.7 million barrels depicting some demand in a week which involved extra-ordinary lower temperatures in the country. Later today the more important US DoE will release its separate report on weekly crude inventory. As per Bloomberg expectations, crude stockpiles in the US fell by 1.3 million barrels though gasoline and distillate stocks are seen rising by 2.5 and 1.25 million barrels respectively.

Natural gas futures continued to rise on Tuesday, extending gains after rising more than 5 percent Monday on forecasts calling for mid-winter cold that could lead to heavy draws on storage. Natural gas futures on the New York Mercantile Exchange closed up 9.5 cents, or 2.22 percent, at 4.369 per million British thermal units and gave back some of those gains to trade at 4.351 in the Wednesday Asian session.