Oil rises as Iran is likely to continue crude exports

On Tuesday, oil surged, with Brent boosting for a fourth consecutive session. The rise came as the prospect of additional supply coming to the market soon from Iran faded with talks dragging on over the U.S. rejoining a nuclear deal with Tehran.

Brent crude increased by 0.5%, which equals 38 cents, and traded at $73.25 a barrel. Remarkably, in the previous session, it boosted by 0.2%.

Additionally, U.S. oil surged 0.5% or 33 cents and settled at $71.21 a barrel. In the earlier session, it declined by 3 cents.

Investors resume to monitor talks between Iran and world powers, including the U.S., to revive a 2015 nuclear deal. Talks continued over the weekend in Vienna. They were described as intense by the European Union, one of the parties involved in the discussions.

Remarkably, if a deal is reached, the U.S. could lift sanctions on Iran that would let it continue crude exports. As we know, Iran is a founding member of the Organization of Petroleum Exporting Countries (OPEC).

But, some investors are uncertain on whether or not they will reach an agreement before the Iranian presidential election, scheduled for Jun 18.

According to ING Economics, it’s unlikely to see the U.S. rejoining the Iranian nuclear deal before the Iranian presidential elections.

Other members of the Organization of Petroleum Exporting Countries and its allies, the group known as OPEC+, promised to ease production cuts at its meeting earlier in May.

ING also added that further supply from OPEC+ will be needed over the second half of 2021. This is due to demand anticipating to resume rebounding.

U.S. crude production from seven major shale formations is likely to hit 7.8m in July

In the United States., producers are also boosting output, aiming to meet growing demand. Meanwhile, the U.S. Energy Information Administration (EIA) announced in its monthly outlook that U.S. crude production from seven major shale formations is anticipated to surge.

According to EIA, it is likely to increase by around 38,000 barrels per day (BPD) in July to about 7.8 million BPD, the highest level unseen since November 2020.

Avtar Sandu is the senior manager of commodities at Phillip Futures. He reported that daily technical indicators point to crude oil in overbought territory, and a pullback is likely.

He also added that investors and traders are also waiting for the outcome of a two-day U.S. Fed meeting scheduled on Tuesday for signals on when it will begin to scale back monetary stimulus.

The Federal Reserve is likely to start debating how and when to begin tapering a massive asset-purchase program that helped support the U.S. economy throughout the COVID-19 pandemic.