Oil Drops with Iran Optimistic on Sanctions Relief

(Bloomberg) -- Brent crude extended declines after Iran’s president said the broad outline of a deal to end sanctions on its oil had been reached.

Futures in London lost 1.8%, after slumping 3% on Wednesday. President Hassan Rouhani struck an optimistic tone in comments released by Iranian state television, saying the deal would see oil, shipping, insurance and central bank sanctions lifted. But he noted there are still some issues to be discussed, and his remarks largely echoed those from European Union officials on Wednesday.

The prospect of a return of supply from the OPEC member state is being reflected in Brent’s prompt timespread, with its backwardation narrowing to just a few cents, a sign that market tightness may be easing.

While Brent briefly topped $70 a barrel earlier in the week, it has struggled to sustain that move. The market has been rattled by the outlook for Iranian production, though a timeline for a deal remains unclear. There’s also been a selloff in global markets, while the coronavirus continues to impinge on Indian demand, trimming sales of gasoline and diesel by as much as 20% for top refiner Indian Oil Corp.

A “revival of Iranian oil exports takes a lot of attention currently,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “The key question is when” a deal will be reached, he said.

Prices

Brent for July settlement lost $1.17 to $65.49 a barrel at 10:37 a.m. London time West Texas Intermediate for June, which expires Thursday, fell $1.08 to $62.28 a barrel The more-active July contract declined 1.6% to $62.31

Enrique Mora, the EU official in charge of coordinating diplomacy in Vienna for the nuclear talks, said he expects all parties to return to the 2015 agreement before Iran’s presidential elections on June 18. Citigroup Inc. sees an initial 500,000-barrel-a-day increase in supply from around the middle of the third quarter.

--With assistance from Keith Gosman.

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