Oil prices were mixed on Monday after Iran’s oil minister, Bijan Zangeneh (pictured), said the OPEC supply cut agreement does not need to be extended if high oil prices continued. AP file photo by Vahid Salemi.
Oil prices recover early session losses
Oil prices were mixed in Monday trading after Iran’s oil minister said the OPEC supply cut agreement would no longer be necessary if crude prices remained high.
By 1:26 p.m., EDT, benchmark Brent crude gained 34 cents to $74.40/barrel after dropping earlier in the session to $73.13. US WTI was down 2 cents to $68.38 after falling to $67.14/barrel. The Canadian Crude Index dipped 26 cents to $49.15/barrel, up from a session low of $48.04.
The OPEC pact is set to expire at the end of 2018, however, Russia and Saudi Arabia have publicly supported prolonging the agreement. Participants in the deal achieved 158 per cent compliance with the agreement in March.
As a result, global oil supplies are rebalancing at a time when demand continues to be robust.
“We continue to watch whether the fundamental picture continues to tighten,” Gene McGillian, vice president of research at Tradition Energy told Reuters.
According to Reuters, oil prices along with prices for raw materials dropped after the United States gave American customers of Rusal, Russia’s largest aluminum producer, more time to comply with sanctions. This eased concerns that the Trump administration may target palladium producer Nornickel.
Trumps threats to restore US sanctions on Iran and place new measures against embattled Venezuela have boosted oil prices recently.
“(Fund managers) need a continuous flow of bullish news for their position to be maintained and this week, it’s not a matter of just watching the oil market,” Ole Hansen, Saxo Bank senior manager told Reuters.
Despite the dip on Monday, oil prices continue to be underpinned by robust Asian demand for crude.
“Added price pressure comes from US sanctions against the key oil exporting nations of Venezuela, Russia and Iran,” Kerry Craig, global market strategist at JPMorgan Asset Management told Reuters.
In a separate note, JPMorgan wrote “Stay long oil.”
The Trump administration says Congress and its European allies have until May 12 to “fix” the nuclear deal with Iran. If no new deal is agreed upon, Iran’s crude exports could be reduced which would further tighten global supplies.
“The uncertainty of the administration makes things very difficult,” McGillian told Reuters. He added that sanctions against Iran or Venezuela could also cause market swings.