By Barani Krishnan
Investing.com – Oil prices fell as much as 2% on Wednesday on talk of a nuclear deal by May for Iran that would take U.S. sanctions off the Islamic Republic’s crude exports, potentially adding another two million barrels per day or more to the market.
Crude futures were already down earlier in the day after a somewhat bearish weekly dataset on released by the U.S. Energy Information Administration.
Further depressing the market was news from wire agencies that indirect talks between Iranian and U.S. negotiators, held in Vienna through European intermediaries, were bearing fruit.
“The Biden administration has signaled it is open to easing sanctions against critical elements of Iran’s economy, including oil and finance, helping narrow differences in nuclear talks,” Reuters reported, quoting sources involved in the talks. “Progress has come as the U.S. laid out more clearly the contours of the sanctions relief it is prepared to provide”.
The report added that the United States was open to lifting terror sanctions against Iran’s central bank, its national oil and tanker companies and several key economic sectors including steel, aluminum and others.
It also quoted Russia’s ambassador to the United States as saying that the negotiations could be completed by late May, when an agreement ensuring continued International Atomic Energy Agency oversight of Iran’s nuclear activities expires.
New York-traded , the benchmark for U.S. crude, was down $1.46, or 2.3%, to $61.21 per barrel by 2:07 PM ET (18:07 GMT). It fell to a session low of $60.87 earlier.
London-traded , the global benchmark for crude, was down $1.36, or 2%, to $65.21. Brent fell to as low as $64.96 earlier.
Iran has said that it could return “within months” to its peak oil production of nearly 4 million barrels a day once the sanctions on its oil — imposed by former U.S. president Donald Trump in 2018 — are lifted. Sources familiar with the country’s crude output currently estimated its production at around 2 million barrels daily.
Analysts say the additional supply from Iran, whenever that comes, will force a reconfiguration of global oil supply that could be more bearish than bullish — especially with questions about demand resurfacing after new coronavirus flare-ups in No. 3 oil consumer India.
Oil prices fell to historic negative pricing of minus $40 per barrel in April 2020 at the height of the demand destruction caused by the Covid-19 pandemic. Production production cuts since then by OPEC+ producer alliance has brought the market back, with the rebound accelerating since vaccine breakthroughs for the pandemic in November.
The 23-member OPEC+ — comprising the original 13 members of the Saudi-led Organization of the Petroleum Exporting Countries and 10 other oil producing nations steered by Russia — decided at the beginning of this month to raise production after withholding at least seven million barrels per day from the market over the past year.
OPEC+ plans to pump an additional 350,000 barrels per day in May and June, and a further 400,000 daily in July.
It is not known if it will proceed with those plans if Iran gets its nuclear deal by May.
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