Oil set for first weekly drop since December on Iran progress

Oil headed for the first weekly loss since mid-December as a flurry of diplomacy increased the chance of an Iranian nuclear deal being revived, paving the way for a resumption in official flows from the nation.

Futures in New York slid toward $89 a barrel on Friday and are down more than 3 percent this week. Officials from the US to Europe have indicated that sides are closing in on a nuclear pact after talks resumed in Vienna Tuesday. A bigger-than-expected jump in US inflation that stirred hawkish Federal Reserve comments added to the bearish sentiment.

Oil’s surge to the highest level since 2014 has been underpinned by stronger-than-expected demand and supply outages in some regions. While the rally has taken a breather, OPEC said in a monthly report Thursday that the recovery in global consumption could surpass its forecasts this year as the rebound in economic activity and travel gathers pace.

Rising energy prices are causing concern for governments worldwide. White House Economic Advisor Jared Bernstein told CNN this week that releasing more crude reserves to tackle surging gasoline prices was an option, while the soaring cost of diesel is straining truck operators throughout Asia.

“The situation on Iran will be watched closely by the market, although that impact is likely further down the line,” said Suvro Sarkar, an energy analyst at DBS Bank Ltd. in Singapore. “The oil market is consolidating and waiting for further news at this time, traders are in a wait-and-watch mode.”

The resumption of a nuclear accord with Iran could help alleviate some of the tightness in the global supply-demand balance. White House Press Secretary Jen Psaki said a deal that addresses concerns of all sides was in sight and EU foreign policy chief Josep Borrell said parties were “reaching the last steps.” Bloomberg News

Image credits: AP


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