Oil prices finish higher, suffer a weekly loss on progress toward Iran nuclear deal

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Oil futures climbed Friday, buoyed by a possible storm formation in the Gulf of Mexico. But prices still registered a weekly loss, pressured in part by signs of progress toward a restoration of the Iran nuclear deal, which could lead to more oil on the global market.

The “possibility of the return of Iranian oil,” pressured prices for the week, said Phil Flynn, senior market analyst at The Price Futures Group.

On Friday, however, prices got a boost from a weather system developing in the Gulf of Mexico, he told MarketWatch. “A tropical disturbance is a reminder that [Atlantic] hurricane season is upon us, and it seems to want to start early.” The hurricane season officially begins on June 1 and can lead to disruptions in energy production and refinery activity in the region.

The National Hurricane Center on Friday showed a tropical disturbance forming in the Gulf, and warned that an increase in activity could result in the formation of a “short-lived tropical depression or storm before the system moves inland over the northwestern Gulf Coast” late Friday.

The news comes a day after the National Oceanic and Atmospheric Administration said it predicts another “above-normal” Atlantic hurricane season, but experts do “not anticipate the historic level of storm activity seen in 2020.”

Looking ahead to next week, oil traders are likely to “focus on the Iran deal, but also get a sense of the demand expected for the Memorial Day Holiday — the unofficial kickoff to the summer driving season,” said Flynn.

Read: Why retail gas prices might not have hit their high for the year

West Texas Intermediate crude for July delivery
CL00,
+2.74%

CLN21,
+2.74%
rose $1.64, or nearly 2.7%, to settle at $63.58 a barrel on the New York Mercantile Exchange, following a loss of 2.2% on Thursday.

July Brent crude
BRN00,
-0.02%

BRNN21,
-0.02%,
the global benchmark, advanced $1.33, or 2%, to $66.44 a barrel on ICE Futures Europe after Thursday’s 2.3% decline.

For the week, U.S. benchmark WTI oil still logged a fall of 2.7%, based on the front-month contracts, while Brent crude declined by 3.3%, according to Dow Jones Market Data.

For now, “traders are effectively setting aside Iran’s comments, where it alleged to have made progress in a nuclear deal,” said Manish Raj, chief financial officer at Velandera Energy.  

A U.S. Department of State spokesperson said on Thursday that “many challenges” remain, according to S&P Global Platts.

Those comments make Iran’s statements “appear more of political posturing rather than material facts,” said Raj. Crude reversed Thursday’s losses as it “sees ‘smoke and mirrors’ in Iran’s statements.”

In a note, Carsten Fritsch, analyst at Commerzbank, said the European Union diplomat shepherding negotiations over the deal expressed confidence that an agreement would be reached as the latest round of discussions concluded earlier this week.

Iranian President Hassan Rouhani on Thursday said the U.S. was ready to lift sanctions, though there was no confirmation from the U.S. Rouhani was contradicted by a senior Iranian official, according to Reuters.

“If the oil sanctions imposed on Iran were indeed to be lifted, up to 2 million barrels of additional crude oil per day could flood the market,” Fritsch said.

He noted that Iran exported 2.2 million barrels of crude oil per day on average between April 2016 and July 2018, before the U.S. withdrawal from the JCPOA and the subsequent reinstatement of sanctions by the Trump administration caused Iranian oil exports to decline to just a few hundred thousand barrels per day.

Additional Iranian oil exports would roughly equal the supply deficit projected by the International Energy Agency in the fourth quarter, he said. As a result, the Organization of the Petroleum Exporting Countries and its allies would have no need to further expand output to prevent a tightening of the market.

Meanwhile, the “positive mood” for oil Friday is also supported by the “improving situation in India, as the partial lockdowns appear to be short lived,” Raj said. Still, “India remains on everyone’s watch list, and developments from India will dictate near-term price direction for oil.” India is the world’s third-largest energy consumer.

On Nymex, petroleum products climbed along with oil prices, with June gasoline
RBM21,
+1.00%
up 1% at $2.07 a gallon, ending the week with a loss of 2.7%. June heating oil
HOM21,
+1.14%
climbed 1.2% to $1.99 a gallon, down 2.4% for the week.

June natural gas
NGM21,
-0.58%
settled at $2.91 per million British thermal units, down nearly 0.7% for the session, with prices posting a weekly loss of 1.9%.



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