(Bloomberg) – Crude plummeted to the highest in nearly two weeks, as mounting delays in Europe’s reopening and looming Iranian supply dampened hopes of a rapid decline in global inventories.
On Monday, futures in New York fell 4.6%, sending prices to the lowest level in more than a week and well below the 50-day moving average for US crude. The UK could delay international travel beyond May 17 if COVID-19 cases continue to rise around the world, while Italy also extended some restrictions on travelers, adding to pressure for recovery of the consumption of Petroleum.
Meanwhile, Iran, the United States, and the remaining members of the 2015 nuclear deal will meet in Vienna on Tuesday to discuss the deal’s possible resurrection, laying out a possible path toward removing sanctions on the Middle Eastern country’s oil exports. . However, Iran indicated that the talks will not be successful if the United States does not completely remove the sanctions.
“OPEC + ‘s decision to gradually increase production over the long term, combined with the news that there could potentially be more Iranian production, could mean that the market perceives there will be a greater imbalance than before,” said Bart Melek, head of commodity strategy at TD Securities. “Demand from Europe, which is significantly slower, could derail” short-term consumption prospects.
An increased Iranian supply returning to the market and renewed closures complicate the outlook for OPEC and its allies, which agreed last week to increase production by more than 2 million barrels per day over the next few months. Iran’s crude, condensate and petroleum exports could easily reach up to 2 million barrels a day in the coming months amid a relatively subdued US response to higher shipments, according to consultancy FGE.
Still, Goldman Sachs Group Inc. believes that “much more” production will be needed during the Northern Hemisphere summer to meet rising demand, and OPEC + could adjust its decision as necessary when it meets in late April.
Original Note: Oil Drops With Virus Risks in Europe Dimming the Demand Outlook
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