A joint statement released Thursday said the process of drafting a final deal on Iran’s nuclear program can begin. The deadline for a final deal is June 30. (…)
Iran, which has 10% of the world’s crude-oil reserves, has seen its production and export capacity sharply curtailed by sanctions. Its crude exports dropped from 2.5 million barrels a day in 2011 to 1.1 million barrels a day in 2013, according to the U.S. Energy Information Administration.
Analysts say Iran has between 20 million and 35 million barrels of crude oil in storage that it can immediately release if sanctions are lifted, but experts are divided on how quickly the country could ramp up production from its oil fields.
Brent, the global crude-oil benchmark, settled down $2.15, or 3.8%, to $54.95 a barrel on ICE Futures Europe. Prices fell 2.6% on the week.
The U.S. benchmark fell 95 cents, or 1.9%, to $49.14 a barrel on the New York Mercantile Exchange, posting a 0.6% weekly gain. (…)
The price difference between the two benchmarks shrank to $5.81 a barrel, down from $7.01 on Wednesday.
“Any additional international oil has much more of a negative impact on Brent,” said Dominick Chirichella, analyst at the Energy Management Institute. Brent crude oil, which is produced in the North Sea, would compete more directly with Iranian oil than U.S. crude.
A key question for oil investors is how the Organization of the Petroleum Exporting Countries, a cartel of 12 oil-producing nations that includes Iran, would react to any additional Iranian production. OPEC opted in November to maintain its production quota of 30 million barrels a day, a decision that sent prices plunging. The group next meets in June.
“That’s going to be a phenomenally interesting meeting,” Mr. Chirichella said. If top OPEC producer Saudi Arabia declines to cut production to make room for Iranian barrels, he said, “maybe this is another nail in the overall coffin of OPEC.” (…)
“In practical terms, very little incremental [Iranian] oil will likely be allowed to flow until late this year at the earliest—by which time global oil balances should be better able to absorb it,” said analysts at Credit Suisse AG in a note.
President Barack Obama faces a defining test of his presidency as he tries to sell his “historic” framework nuclear agreement with Iran to a Congress full of Iran-sceptics from both parties. (…)
The key for the White House, however, will be the group of centrist Democrats who could secure approval of Iran legislation the administration opposes. The initial reaction from that group was far more favourable.
“The deal looks better to me than I expected,” said Angus King, the Maine independent who usually votes with the Democrats and who is one of the cosponsors of the Corker bill.
Mr King said he was watching to see if Republicans treated the issue as a political football. “If I see them slipping towards partisanship and trying to embarrass the president, then I am off this bill,” he said. (…)
Karim Sadjadpour, an Iran specialist at the Carnegie Endowment, said it was unlikely that there would be enough Democratic votes in Congress to block a deal, particularly after congressional critics had placed such emphasis on the potential objections of the French.
“It will be very difficult for Congress to scuttle this, especially if the French are saying this is good for us,” he said. (…)
U.S. OIL SUPPLY AND DEMAND
Crude oil stocks increased 2.63 million barrels at Cushing, Oklahoma, to 58.94 million barrels during the week ended March 27, U.S. Energy Information Administration (EIA) data showed Wednesday. Stocks at Cushing, the delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract, equaled 83% of working storage capacity, EIA data showed. Cushing has seen net inflows each week since December 5. Traders are taking advantage of later-dated futures contracts being more expensive than near-term delivery, making Cushing storage profitable. (…)
The weekly build has averaged 2.4 million barrels during the last four weeks. Assuming this pace was to continue, Cushing would reach its working capacity by the end of April.
Production fell 36,000 barrels per day (b/d) to 9.386 million b/d. Output in the continental U.S. decreased 37,000 b/d to 8.874 million b/d, while Alaskan production rose 1,000 b/d to 512,000 b/d. (…)
Refineries were more active the week ended March 27, helping mitigate the crude oil build. Crude oil runs rose 198,000 b/d to 15.728 million b/d.
For the same reporting period a year ago, crude oil runs were 15.315 million b/d. In 2014, crude oil runs did not top 16 million b/d until the end of May.
U.S. Gasoline stocks fell 4.258 million barrels to 229.128 million barrels, a 4.1% surplus to the EIA five-year average for the same reporting period.
Gasoline implied demand (the amount of product that moves through the U.S. distribution system, not actual end consumption) jumped 816,000 b/d to 9.435 million b/d, the highest level since the week ended December 26, and 7.35% above the five-year average for the same reporting period.
Did you notice that of the 17.1 million autos sold (annual rate) in March, 9.4M (55%) were light trucks and SUVs, a 10-year high?