Oil falters as Iranian ‘proposals’ for nuclear weapons approach
The oil market is focused on the Iran nuclear deal negotiations, which could lead to the end of sanctions on this key OPEC member.
Oil prices added to losses on Monday after the head of Iran’s diplomacy said his country would submit its “final proposals” on the nuclear file before midnight local time (9:30 p.m. Paris time). The possibility of a deal that would allow Iranian production to return to the market despite Chinese demand suffering from a sluggish economy sent prices snorting.
A barrel of Brent from the North Sea for delivery in October was down 5.18% at $93.08 as of 11:50 GMT (1:50 p.m. Paris time). The barrel of American West Texas Intermediate (WTI) for delivery in September fell 5.27% to $87.24.
The black gold market is focused on negotiations surrounding the Iran nuclear deal, which could lead to the end of sanctions on this key member of the Organization of the Petroleum Exporting Countries (OPEC). According to Minister Hossein Amir-Abdollahian, his country will announce its “final proposals” on the nuclear dossier on Monday after he says the United States has accepted two of Iran’s demands.
“If our proposals are accepted, we are ready to conclude [les discussions] and to announce the deal at a meeting of foreign ministers,” he added. “Until a deal is signed, nothing should be taken for granted,” warns Oanda analyst Craig Erlam, who predicts, however, that pressure on oil prices will increase negotiations would succeed.
Disappointing data in China
Prices also suffered from disappointing data in China. In July, retail sales and industrial production experienced an unexpected slowdown due to a recovery from Covid-19 and a real estate crisis, which severely impacted activity. The period of weakness in the Chinese economy “is weighing on oil and there is little chance of a recovery in the short term,” summarizes Bjarne Schieldrop, an analyst at SEB, in a statement. “Clearly, sluggish Chinese demand explains the drop in oil prices since June,” he said.
After soaring earlier in the year as demand picked up as lockdown ended and the Russian invasion of Ukraine began, prices fell more than 20% in two and a half months.