MARKET WATCH: Crude prices continue decline as possible Iranian nuclear deal looms

Crude oil prices fell modestly in New York and London on Mar. 30 and in early trading Mar. 31 as investors anticipated a resolution to Iranian nuclear talks.

Russian Foreign Minister Sergei Lavrov said during a news conference that the prospect of a deal is “very good and promising.” The primary issues on the table are the length of possible nuclear restrictions and the lifting of sanctions. An agreement could result in the easing of oil sanctions on Iran, adding even more supply to the global glut.  

Raymond James & Associates Inc. said Iran could add close to 0.5 [million b/d] by yearend 2016 if an agreement is reached, but noted that it pales in comparison to what the US has added to the market (OGJ Online, Mar. 30, 2015).

“In the long run [2-5 years], 0.5 [million b/d] of additional supply eased in over the next 18 months would pale in comparison to the 1.7 [million b/d] of additional supply that US producers added just last year,” RJA said.

PIRA Energy Group said in its weekly recap that oil markets will remain oversupplied with a 2 million b/d surplus in the second quarter, “which will continue to negatively impact physical markets.

“New price lows for Brent are unlikely and WTI is not expected to go below $40/bbl,” PIRA said. “Both prices are anchored by the back of the market and available storage capacity, even if it is floating.”

It also noted that, “Political uncertainties are on the rise with this weekend’s Nigerian elections, Saudi Arabia’s direct military involvement in Yemen, and turmoil in Libya, among other things.”

Energy prices

The New York Mercantile Exchange May crude oil contract dropped 19¢ on Mar. 30 to $48.68/bbl. The June contract dropped 9¢ to $50.41/bbl.

The natural gas contract for May dropped half a penny to a rounded $2.64/MMbtu. The Henry Hub, La., gas price was $2.61/MMbtu, down 2¢.

Heating oil for April delivery was virtually unchanged at a rounded $1.73/gal. Reformulated gasoline stock for oxygenate blending for April also was virtually unchanged at a rounded $1.80/gal.

The May ICE contract for Brent crude lost 12¢ to $56.29/bbl, while the June contract was unchanged at $57.28/bbl. The ICE gas oil contract for April fell $13.50 to $527.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes on Mar. 30 was $51.45/bbl, down $1.48.

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