DTN Oil

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures were shallowly mixed in early trading Monday, as Tropical Storm Claudette moves to the Carolina coastline and Ebrahim Raisi wins Friday's Iranian presidential election, a hardliner that's expected to slow discussions in reaching a deal with Washington in nuclear discussions.

Oil wells in the Gulf of Mexico briefly shut-in by Tropical Storm Claudette are again operating after the storm made landfall over the weekend, quickly moving in an east by northeast path as it nears the Carolina coastline, according to DTN Weather.

"Claudette will bring widespread near gale and gale force winds, elevated surf, and riptides to portions of the Carolinas and Eastern Seaboard Monday and Tuesday as the system accelerates northeastwards," said DTN Weather.

The storm, which as a tropical depression left a trail of destruction in parts of Alabama over the weekend, is likely to adversely affect driving demand along parts of the coastline that attract tourists heading to the beach, with Monday the first day of summer. However, Claudette is seen quickly moving into open waters, while the outlook remains bullish for summer driving demand.

Internationally, Raisi, Iran's chief justice and backed by Iran's supreme leader Ali Khamenei, is expected to delay reaching agreement on the U.S. return to the 2015 Joint Comprehensive Plan of Action. The United States, under the Trump administration, withdrew from the JCPOA in May 2018, and placed punishing sanctions on the Iranian economy, including the country's oil exports and on individuals, with Raisi also under U.S. sanctions. In response, Iran has enriched uranium above the threshold established by the agreement, presenting challenges in reestablishing the JCPOA.

Raisi previously criticized the JCPOA, but recent comments he made suggest a desire to reestablish the accord. What new demands he might make are uncertain, while Ali Khamenei will make the final decision.

Raisi, which assumes the presidency from Hassan Rouhani in August, said Monday that Iran's foreign policy would not be limited to the 2015 nuclear agreement, and indicated a priority would be in improving ties with Gulf states.

Now in their sixth round of multilateral negotiations in Vienna, U.S. State Department national security adviser Jake Sullivan on Sunday said Washington and Tehran still have much they disagree on.

Iran plans to increase oil production to their pre-sanction's level of 3.8 million barrels per day (bpd), up from 2.455 million bpd in May and 1.986 million bpd in November 2020 when U.S. presidential elections were held, with output rates estimated by secondary sources cited by the Organization of the Petroleum Exporting Countries. Market expectations contend the lack of investment would slow such a recovery but estimates still suggest Iranian output could climb another 500,000 bpd during the third quarter and reach a one million bpd or more increase from now over the next year.

The lifting of U.S. sanctions would trigger a surge of Iranian exports right away, with Iran said to have 200 million barrels (bbl) of oil in onshore and offshore storage, a sizable portion of which is condensate, a preferred feedstock in Asian petrochemical production. According to Kpler data cited in a Reuters article, Iran as 78 million bbl of oil and condensate in floating storage.

In early trading, July West Texas Intermediate futures are up modestly near $71.75 bbl ahead of Tuesday's expiration, with August WTI futures trading at a $0.35 discount to the expiring contract. ICE August Brent futures firmed to $73.55 bbl. July RBOB futures are 1.4 cents lower near $2.1545 gallon, and July ULSD futures were down 1.4 cents near $2.0790 gallon.

Brian Milne can be reached at brian.milne@dtn.com