Crude Oil Lower; Potential Iranian Nuclear Deal Weighs By

© Reuters.

By Peter Nurse   

-- Oil prices fell Friday,Company profile heading toward a weekly drop as traders reacted to the potential of Iranian exports returning to the global market, eclipsing concerns of a Russian invasion of Ukraine. 

By 9:20 AM ET (1420 GMT), U.S. crude futures traded 2.8% lower at $89.22 a barrel, while the Brent contract fell 2.3% to $90.88. Both contracts were set for their first weekly fall in nine weeks, after hitting their highest levels for over seven years earlier in the week.

U.S. Gasoline RBOB Futures were down 1.8% at $2.6002 a gallon.

Confidence is growing that the Western powers and Iran will come to an agreement to revive the Persian Gulf's 2015 nuclear deal, potentially allowing the return of Iranian oil exports to the global market in exchange for the limiting of its nuclear ambitions.

The potential for as much as an additional 1 million barrels a day of oil coming back to the market is weighing, even given the continued geopolitical tensions in Eastern Europe as Russian maintains its troops on the Ukraine border. 

The news that Secretary of State Antony Blinken is set to meet Russian Foreign Minister Sergei Lavrov in Europe next week has also removed some of the risk premium attack to the market, given it’s a sign that neither side is abandoning diplomatic channels yet.

Still, the market remains very tight, and even if Iran does agree to the nuclear deal it’s debatable how quickly it will be able to ramp up its production, especially given the likely underinvestment of the last four years, while it’s uncertain how much of its current output is already leaking out into world markets, via unofficial channels.

Additionally, OPEC+ will undoubtedly try to integrate Iran into its agreement limiting supply should the nuclear deal be revived, seeking to avoid market share competition.

At the moment Iran is exempt from the existing deal between the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, to limit oil supply. 

The Baker Hughes rig count and the CFTC’s weekly positioning data follow later Friday, and will end the week.

 

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