Oil Rebounds Amid Broad Commodities Rally Ahead of Iran Talks - Bloomberg

Valero Energy's refinery in Corpus Christi, Texas.

Photographer: Eddie Seal/Bloomberg

Oil rebounded, mirroring a broader rally in commodities, as talks got under way on reviving the Iranian nuclear accord.

West Texas Intermediate rose 1.8%, with most other commodities also climbing on the back of stronger economic data. The International Monetary Fund lifted its view of global growth this year for the second time in three months.

Crude had plunged on Monday amid a resurgence in Covid-19 infections in Europe and an imminent increase in OPEC+ supplies, which could swell further with an agreement with Iran. Multiparty negotiations began in Vienna on Tuesday, though the chances of a breakthrough are seen by analysts as slim.

WTI has swung either side of $60 a barrel in recent weeks

Oil rallied 22% in the first quarter as the rollout of vaccines spurred optimism that demand would rebound, while the Organization of Petroleum Exporting Countries and its allies kept a tight rein on supply. Although volatility has climbed in recent weeks amid waves of the virus in some nations, prices have also been supported by a slew of positive economic data from the U.S.

The “oil market is settling in after the OPEC+ decision on Thursday to start normalizing output,” said Jens Pedersen, a senior analyst at Danske Bank A/S. “Demand looks relatively bright in particular with reopening under way in the U.S. and strong support from monetary and fiscal policy.”

Prices
WTI for May delivery gained 1.8% to $59.68 a barrel at 8:47 a.m. New York time Brent for June settlement rose 1.6% to trade at $63.12

The oil market’s structure retreated sharply on Monday, with the much-watched spread between the nearest December contracts falling by almost $1. The decline suggests weakening expectations for the health of the market, though the spread recovered somewhat on Tuesday.

The gradual nature of the return of OPEC+ supplies will prompt a deeper drawdown of global stockpiles in the second quarter, Citigroup Inc. said in a report, as banks retain a positive outlook on the oil market with the northern hemisphere summer approaching.

Yet the potential for a return of Iranian barrels continues to weigh on sentiment. Negotiators from the Islamic Republic and the U.S. will attempt to resurrect the troubled nuclear deal, though the talks face significant hurdles. Tehran has insisted on full sanctions removal for it to scale back nuclear activity, while Washington has ruled out any “unilateral gestures.”

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Oil Rebounds Amid Broad Commodities Rally Ahead of Iran Talks - Bloomberg

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