LONDON (MarketWatch) — Oil futures remained under pressure Monday on expectations that talks over Iran’s nuclear program could result in an easing of sanctions against the crude exporter.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in May CLK5, -0.74% were down 61 cents, or 0.9%, at $48.26 a barrel. May Brent crude LCOK5, -0.46% on London’s ICE Futures exchange was down 55 cents, or 1%, at $55.86 a barrel.
Nymex crude had dipped as low as $47.65 a barrel, but trimmed losses after Russian Foreign Minister Sergei Lavrov left the negotiations in Switzerland to return to Moscow, a move that suggested a preliminary deal isn’t imminent. Negotiators face a Tuesday deadline.
Also, news reports said Iran is balking at a provision that would see it ship nuclear fuel out of the country.
Still, the negotiations give oil bears an edge since lifting sanctions is seen adding to the global oil glut, said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
Iran currently exports around one million barrels of oil a day, but has been producing in excess of three million barrels a day at various times over the past year and storing this in tankers and onshore facilities, ANZ Research said, adding that the country may have a stockpile of over 30 million barrels.
Prices had surged last week after Saudi Arabia and its allies launched airstrikes against Iran-linked Houthi militants in Yemen. But the threat of a potential disruption to oil supplies due to the conflict now looks increasingly remote, with the fighting taking place far from areas where oil tankers pass through.
“Just like most geopolitical events, the initial gains quickly eroded without any physical disruption,” a Morgan Stanley report said.
Investors were also worried that the Saudi strike on Iran-backed rebel groups in Yemen may jeopardize the talks over Iran’s nuclear program, but those fears appear misplaced, analysts said.
The drop in oil prices combined with strong refinery margins would likely boost demand from Asian buyers such as China and India, which are looking to build reserves to take advantage of cheaper supplies.
In other petroleum markets, April reformulated gasoline futures RBJ5, -0.06% fell nearly a penny to $1.7889 a gallon, while May natural gas futures NGK15, -0.30% fell 1 cent, or 0.4%, to $2.629 per million British thermal units.
