Business News: Oil holds up thanks to better demand outlook and falling US inventories.
Oil prices stabilized on Wednesday, after a drop in US crude inventories reinforced expectations of a pick-up in demand ahead of the summer peak season and offset concerns that a possible return of Iranian supply would cause a surplus.
Brent rose 16 cents, or 0.2%, to $ 68.81 a barrel at 11.20am EDT (1520 GMT), and US West Texas Intermediate (WTI) crude rose 11 cents, or 0.2%, to $ 66.18 a barrel.
Gasoline product supplied rose to 9.5 million barrels per day, a proxy for demand, while distillate demand was also higher. Gasoline consumption generally rises beginning around US Memorial Day – which falls on May 31 this year – when people take to the roads.
Prices found some support from lifting of coronavirus curbs. “An urge to ‘hit the roads’ in heading out on vacations that were precluded by the pandemic last year will be supporting the gasoline market,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
But market players were also closely watching developments in Iranian-US nuclear talks which could lead to lifting sanctions on Iran’s energy industry and releasing Iranian oil on the market.
“Prices should remain supported over the summer with the only thing keeping oil from price increases being the potential return of Iranian oil, ”said Andy Lipow, president of Lipow Oil Associates in Houston, Texas.
Iran’s government spokesman Ali Rabiei said he was optimistic Tehran would reach an agreement soon, although Iran’s top negotiator said serious issues remained. Analysts have said Iran could provide additional supply of about 1 million to 2 million bpd if a deal is struck.
Iran and global powers have held talks in Vienna since April to work out steps Tehran must take on nuclear activities and Washington should take on sanctions to return to full compliance with the pact Iran reached with world powers in 2015.
Russia said the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC +, should consider a possible increase in Iranian output when assessing further steps.