Oil prices broke hard on rumors that a resumption of an Iranian Nuclear deal could be imminent. The deal could add as much as one million barrels of oil a day to a market that is undersupplied by more than that. Yet there is some doubt that the number will be that large as it is widely known that Iran has been openly skirting sanctions. Yet if a deal is consummated, there will be more barrels, and we already see the price of oil adjust.
Yet the larger issue will be what we have to give up to get Iran back into a deal. The previous deal was a bad deal, and it allowed Iran to fund military operations in Yemen and Syria and threaten Saudi Arabia. Israel has also been against an Iranian nuclear deal because of the continuing threat from Iran to Israel. The devil is in the details, and when you’re dealing with the Iranian regime, well, let’s just say don’t trust but verify. The Biden administration had been desperate to make a deal because their administration popularity ratings are near all-time lows for a presidency and because they have no accomplishments except for bad ones.
Oil analyst Anas Alhajji points out a snapshot of Biden’s desire to get a deal. He points out the US imposed sanctions on Iran & Venezuela, Iran is sending diluent & gasoline to Venezuela. Venezuela’s crude exports increased. The Biden administration is turning a blind eye to keep Iran at the table, so it has to turn a blind eye to Venezuela’s exports.
In the meantime, the US is importing more oil from Russia to replace heavy oil they cannot get from Venezuela or hope to get from the canceled XL piling from Canada.
For weeks, the Biden administration has also been telling us that a war between Russia and Ukraine was imminent. Yet Reuters reported that French President Emmanuel Macron said his meeting with Russian counterpart Vladimir Putin had helped to prevent a worsening of the Ukraine crisis. What that means is uncertain, but some say the oil selloff is in part an easing of war concerns.
Biden met with visiting German Chancellor Scholz at the White House. Fox News reported that the United States and Germany announced their “united approach” to deterring further Russian aggression against Ukraine, with President Biden warning that the Nord Stream 2 pipeline will not be operational if Russia follows through with an invasion of Ukraine.
Early on, oil did hold key support near 8900, and it is possible that we recover because in the near-term oil supply is still tight. We should get another big draw in US crude stocks tonight as some private Cushing watchers are predicting a 3 million barrel plus withdrawal from the supply. If that is correct, it will put supply at the all-important Cushing delivery point below 30 million barrels, well below where they need to be.
In Europe, Javier Blas of Bloomberg says that there is amazing strength in the physical North Sea oil market. Commodity trader Trafigura has bid Forties crude, a key grade for European refiners, at the strongest differential in at least 13 years. Reuters reports that Oman and Dubai’s Middle East crude benchmarks jumped to their highest since Tuesday as robust refining margins spurred demand in Asia.
The outlook for products is mixed with expectations that gasoline supply will build, led by blending components, and diesel will fall due to the cold. In Asia, complex refining margins are at their highest in more than three months, boosted by strong profits for gasoline, middle distillates, and low-sulfur fuel oil. Brent’s premium to Dubai crude is also at its widest since November, making Atlantic Basin grades more expensive for Asian refiners.