Oil headed for a back-to-back loss after an industry report showed a rise in U.S. crude stockpiles and traders tracked talks between world powers on a revival of the Iran nuclear deal. West Texas Intermediate for June delivery tumbled 1%, while global benchmark Brent — which topped $70 a barrel briefly in early Tuesday trade — also declined. The American Petroleum Institute reported that domestic oil stockpiles increased by 620,000 barrels last week, according to people familiar with the figures. At the same time, gasoline and distillate inventories dropped.

Oil slipped from a two-year high as supply concerns returned

A return to the 2015 Iranian agreement could pave the way for the removal of U.S. sanctions and a rise in the country’s crude exports just as the OPEC+ alliance loosens output curbs. On Tuesday, futures sank as much as 3.3% as investors parsed initial comments from a Russian envoy that significant progress had been made. That drop was pared after the same diplomat then played down reports a major announcement was likely Wednesday.

Oil has advanced this year as investors bet that progress battling the pandemic will revive energy demand, depleting the inventories that built up last year. With consumption picking up in many key economies including the U.S., the Organization of Petroleum Exporting Countries and its allies are now gradually restoring some of the production that was cut last year. Still, the pandemic retains a strong grip in parts of Asia, especially in major crude importer India.

“$70 for Brent is untenable in the current circumstances,” said Vandana Hari, founder of Vanda Insights. On Iran, the received wisdom “is that the desire for rapprochement may be strong on both sides, but given the complexity of issues, not enough to get them over the line any time soon,” she said.
PRICES:
  • WTI for June delivery lost 1% to $64.87 a barrel on the New York Mercantile Exchange at 7:40 a.m. in London.
  • Brent for July settlement fell 0.8% to $68.15 a barrel on the ICE Futures Europe exchange.
    • The contract closed 1.1% lower on Tuesday after rising above $70 earlier in the day.

The global market should be able to absorb both the additional Iranian and OPEC+ supplies, assuming shipments from the Persian Gulf nation hit about 3 million barrels a day by the fourth quarter, ING Group said in a note on Wednesday. But any announcement of a nuclear deal will hit sentiment, it said.