Crude Oil Lower; Resumption of Iranian Nuclear Talks Weighs

By Peter Nurse — Oil prices fell Monday, extending last week’s hefty losses, amid persistent concern about weakening demand with the Federal Reserve likely to continue its aggressive monetary tightening.

By 9 AM ET (1300 GMT), futures traded 1.6% lower at $87.58 a barrel, while the contract fell 1.3% to $97.30.

U.S. were up 0.3% at $2.8649 a gallon.

Brent prices fell almost 14% last week, posting their largest weekly drop since April 2020 to their lowest levels since February, while WTI lost almost 10% after soft U.S. gasoline consumption data raised fears that demand was weakening at the world’s largest consumer.

A strong monthly helped the market on Friday, but it also increased the chances that the Fed will continue its aggressive interest

rate hikes

into September, slowing growth further in the world’s largest economy already in a technical recession.

Also weighing was the resumption of indirect talks between Tehran and Washington in Vienna late last week on reviving Iran’s 2015 nuclear deal, which could potentially see the return of Iranian oil to the global market.

These talks had resumed in a “serious” atmosphere, according to Russia’s envoy, with Tehran reportedly dropping a major stumbling block – its demand for the removal of its Revolutionary Guards from a U.S. sanctions list.

“The resumption of Iran nuclear talks…is one potential downside risk for the oil price, given the ability of the country to quickly ramp up production if a deal is struck,” said Craig Erlam, an analyst at OANDA. “Not to mention its reportedly large oil and gas reserves. A deal could apparently be struck within days although we have heard that a lot at times this year.”

That said, there was some good news, as China, the world’s top crude importer, brought in 8.79 million barrels per day of crude in July, up from a four-year low in June, but still 9.5% less than a year earlier.

Oil is “down but not out,” according to analysts at Goldman Sachs. “We continue to expect that the oil market will remain in unsustainable deficits at current prices.”

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