Energy Prices Move Higher on Skepticism about Iran Nuclear Deal
May 25, 2021
Energy prices traded higher yesterday mainly the result of increased skepticism that Iran and the US will come to an agreement concerning the Iran nuclear accord. Also supportive is the ongoing outlook for more people to get vaccinated which will increase demand for airlines and gasoline as more and more people head out for summer vacations.
US Secretary of State, Antony Blinken, said the United States has not seen yet whether Iran will do what it needs to do to come into compliance with its nuclear commitments in order to have sanction lifted.
Citi said it continues to expect an early agreement on some aspects of the nuclear agenda between Iran and the US. However, this will only cause a partial return on Iranian barrels to the market. It expects strong summer demand, with markets tight enough to warrant crude prices in the mid-$70 dollar per barrel. It expects Iranian crude output at 2.1 million bpd for April and May and expects it to increase to 2.6 million bpd in July and August and further increase to 2.7 million bpd in the fourth quarter.
Goldman Sachs said it expects oil prices to increase to $80 dollar per barrel in the fourth quarter of this year, arguing that the market has underestimated a rebound in demand even with the possible resumption in Iranian supply.
Morgan Stanley analysts said, “in the near term, oil markets are in deficit and demand is improving.” It said the long end of the forward curve remains well above marginal cost of new supply, a risk worth monitoring as we move beyond the initial stages of the market recovery.
The US Department of Transportation said travel on US roads and streets in March increased by 19% on the year to 263.0 billion vehicle miles. While demand has improved year on year, it remains below 2019 levels for the month of March.