(C) Reuters. FILE PHOTO: A petrol station attendant prepares to refuel a car in Rome, Italy, January 4, 2012. REUTERS/Max Rossi
By Bozorgmehr Sharafedin
LONDON (Reuters) -Oil prices slipped on Wednesday as worries that a possible return of Iranian supply would cause a glut outweighed expectations of improving U.S. fuel demand that were reinforced by a drop in weekly inventory estimates.
Brent fell 40 cents, or 0.6%, to $68.25 a barrel by 1315 GMT, and U.S. West Texas Intermediate (WTI) crude was down 52 cents, or 0.8%, at $65.55 a barrel.
“The potential for a return of Iranian oil supply into the market has been keeping oil prices from gaining further,” said ING analyst Warren Patterson.
Market players are also closely watching developments in Iranian-U.S. nuclear talks which could lead to lifting sanctions on Iran’s energy industry and more Iranian oil on the market.
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.
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.
OPEC+ is bringing back 2.1 million barrels per day (bpd) of oil production through July, easing cuts to 5.8 million bpd. Their next meeting is set for June 1.
Analysts have said Iran could provide additional supply of about 1 million to 2 million bpd if a deal is struck.
However, prices found some support earlier in the session from lifting of coronavirus curbs and a rise of demand ahead of the northern hemisphere’s summer driving season.
U.S. crude oil and fuel inventories fell last week, two market sources said, citing American Petroleum Institute figures.
Crude stocks fell by 439,000 barrels in the week ended May 21, gasoline inventories fell by 2 million barrels and distillate stocks dropped by 5.1 million barrels, the sources said.
“In our view, the fundamental situation on the oil market remains balanced,” said Commerzbank (DE:CBKG) analyst Eugen Weinberg, adding that Brent “will make a renewed bid for the $70 per barrel mark in the next few days.”
Oil falls as Iranian supply prospect outweighs demand optimism
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