Oil prices recovered slightly after the decline
Yesterday, Brent quotes fell to $82.3 /bbl, while Tuesday evening trading was about $86.5 /bbl. The negative dynamics were because Iran and the EU agreed to resume negotiations to return to the 2015 nuclear agreement by the end of next month.
The exact date will be next week. Nevertheless, we still believe that the lifting of US sanctions on the export of Iranian oil is still far away. The round of talks ended in June, and since then, Iran has repeatedly postponed new meetings under various pretexts, continuing to develop its nuclear program.
In addition, Iran made it clear that to resume negotiations, the United States must first “unfreeze” Iranian assets abroad for $10 billion as a sign of “goodwill.”
Iran’s economy is suffering because of the sanctions imposed by the United States. Still, the new government of the Islamic Republic emphasizes the importance of a “resistance economy” that can withstand sanctions. In addition, Tehran is concerned that the improvement in relations with the United States may be temporary, especially if Republicans win the presidential elections in 2024.
Iran demands to guarantee that the United States will not impose sanctions again in the future, but the Joe Biden administration cannot give such guarantees. In our opinion, if sanctions will lead to an increase in Iranian oil supplies to the market in 2H22, however, it is highly likely that negotiations with Iran will go very slowly or will be fruitless at all.
Yesterday, Brent’s quote recovered from $82.3/bbl to $84.6/bbl. Trading by increased volatility. The US dollar declined amid weak US GDP data for 3Q21. This indicator grew by 2% year-on-year compared to the previous quarter (the consensus forecast assumed 2.6%), while in 2Q21 — by 6.7%.
The deterioration in the dynamics of GDP was because the growth of personal consumption in the United States sharply slowed down. Another important news for the oil market was Bloomberg’s announcement that according to the new assessment of the
OPEC technical committee it on the eve of the next meeting of the alliance, which will take next week, world commodity reserves of hydrocarbons in 4Q21 will decrease by 1.1 million barrels/day. In contrast, previously, a decrease of 0.67 million barrels/day was expected.
The fixation on the nearest Brent futures was at the level of $84.32/bbl, at $0.26/bbl. Lower than the day before. This morning, Brent’s quotes are holding below $84.5/bbl. Investors are waiting for eurozone GDP data for 3Q21 and the monthly oil production report (EIA-914), and September statistics on personal income and expenses in the United States.
In our opinion, oil prices are unlikely to recover further after the decline in the middle of the week since there are no growth factors, and we expect quotes to end the week around $84/bbl.
