WASHINGTON, D.C. (DTN) -- With traders positioning ahead of the long Memorial Day holiday weekend, oil futures on the New York Mercantile Exchange erased an early advance to settle the final session of May lower while July Brent crude on the Intercontinental Exchange eked out a modest gain at expiration. Both crude benchmarks notched better than 3% monthly gains amid a broad pickup in economic activity across developed markets and prospects of even deeper public spending in the United States that is seen boosting energy demand in the world's largest economy.
NYMEX RBOB June futures expired 1.16 cents lower at $2.1402 per gallon, with the July contract settling at $2.1369 in the backwardated market. NYMEX June ULSD declined 1.19 cents to expire at $2.0445 per gallon with the July contract settling at $2.0383 per gallon.
Bolstered by upbeat economic data this month, West Texas Intermediate futures surged to the highest settlement on the spot continuous chart in 2 1/2 years at $66.85 bbl Thursday, while settling Friday's session down $0.53 at $66.32 bbl. International crude benchmark Brent contact for July delivery expired $0.17 higher at $69.63 bbl -- matching the March 11 14-month high settlement on the spot continuous chart, with August Brent Crude futures settling at a $0.91 discount to the now-expired July contract at $68.72 bbl.
While widening today, Brent futures premium to the U.S. benchmark narrowed this week; it was driven, in part, by expected greater flow of Iranian oil exports to the global markets which have increased during the Biden administration. Parties that are part of negotiations reported substantial progress this week in ongoing multinational talks in Vienna aimed to restore the 2015 Joint Comprehensive Plan of Action that the U.S. withdrew from in 2018, with an agreement now seen possible.
International inspectors were able to temporarily extend a nuclear monitoring agreement with Iran -- avoiding a collapse in talks over the JCPOA, while Iranian President Hassan Rouhani said Washington agreed to remove all sanctions on Iranian oil and shipping industries. If a deal is realized, S&P Platts estimates Iranian crude and condensate exports would grow from 800,000 bpd in April to 1.4 million bpd in December and 2 million bpd by July 2022.
Iran's crude output moved above 2 million bpd in April, according to the most recent Monthly Oil Market Report from the Organization of the Petroleum Exporting Countries, driven in part by increased buying interest from China.
The evolving developments could complicate OPEC-plus efforts to draw down global inventories with growing exports from Iran, prompting a potential change in the group's ongoing production agreement. OPEC-plus held almost 7 million bpd of production offline in April, with a planned increase of 500,000 bpd this month, 350,000 bpd in June and 441,000 bpd in July. Saudi Arabia, which unilaterally held back another 1 million bpd in crude production, also indicated it would bring those barrels back to market.
Russia's Deputy Minister Alexander Novak suggested Wednesday OPEC-plus must consider the potential return of Iranian barrels when the group meets on Monday and Tuesday (May 31-June 1). Some analysts expect OPEC-plus would agree to offset a projected ramp up in Iranian oil output by holding back production gains by 1 million bpd in the second half of 2021, leaving destocking path unchanged. Energy Information Administration reported total commercial crude oil and product stocks in the U.S. at 1.276 billion bbl on May 27, a 14-month low while 33.4 million bbl or 2.6% below the five-year average.
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