DTN Oil

WASHINGTON (DTN) -- Extending gains into a second consecutive week, oil futures nearest delivery on the New York Mercantile and Brent crude traded on the Intercontinental Exchange rallied into afternoon trade Friday, sending the West Texas Intermediate July contract to the highest settlement in 2 1/2 years after United States signaled there would be no imminent deal on nuclear proliferation with Tehran, easing concerns over additional Iranian barrels on the global oil market this summer.

"There is no lack of distrust between and among Iran and the other partners and allies with whom we're working on this," said U.S. State Department spokesman Ned Price, while addressing progress on multilateral talks in Vienna aimed at reviving 2015 Joint Comprehensive Plan of Action. On Wednesday, all parties to the agreement adjourned talks until later next week, leaving the Austrian capital without a deal that was seen imminent by some analysts just few days ago. The oil complex sold off hard on reports of potential breakthrough in talks after Iranian President Hassan Rouhani suggested the U.S. agreed to lift all sanctions targeting Iran's oil exports, petrochemical and shipping industry. With diplomats having left only eight days of talks before the Iranian Presidential Elections on June 18 seen ushering in a hard-liner, it remains highly uncertain that a deal could be reached any time soon, leaving some breathing room for demand to pick up before those barrels could potentially hit the market.

Meanwhile, Organization of the Petroleum Exporting Countries together with Russia-led partners left their production quotas unchanged at their June 1 meeting, restoring output by 350,000 barrels per day (bpd) this month and another 441,000 bpd in July. Saudi Arabia is also gradually bringing back 1 million bpd in an additional unilateral cut it made earlier this year. The group gave little indication on the policy change beyond July and whether the potential return of Iranian barrels might prompt additional adjustments.

Further supporting the complex, the U.S. dollar nosedived on Friday after gaining some traction earlier in the week on the back of bullish economic data pointing to accelerating demand recovery in the world's largest economy. The greenback's weakness, however, followed a somewhat disappointing employment report from the Department of Labor showing the economy added 559,000 new jobs in May, with the labor participation rate remaining little changed 61.6% on the month. Currently, there are still about 7.6 million jobs missing compared to pre-pandemic levels, despite a record-breaking 8.1 million open positioned listed in May, according to the latest Job Openings and Labor Turnover Survey.

The addition of more than a half a million jobs to the U.S. payrolls last month may have nudged the economy further towards the "substantial progress" Federal Reserve officials want to see before changing monetary policy, but likely not far enough to accelerate the discussion over tapering a massive $120 billion a month bond-purchasing program.

"I view it as a solid employment report ... but I would like to see further progress," said Cleveland Federal Reserve President Loretta Mester on CNBC.

This week, the Federal Reserve announced plans to start selling its portfolio of corporate bonds and exchange-traded funds bought during the pandemic. The move is separate from the central bank's quantitative easing efforts, where the Fed has continued its monthly purchases of treasuries and mortgage-backed securities each month. Markets expect the central bank to start discussing reducing the pace of those purchases later this summer or fall.

On a session, NYMEX July WTI futures rallied 81 cents to settle at $69.62 barrel (bbl), while posting a better than 4% weekly gain. ICE August Brent crude futures finished 58cts higher at $71.89 bbl. NYMEX July ULSD futures gained 1.82 cents to $2.1199 gallon, with July RBOB futures gaining 97 cents for a $2.2115 gallon settlement.

The dollar index declined 0.43% against the basket of foreign currencies, sliding from a three-week high 90.520 on Friday, as traders readjusted their positions on how soon the Federal Reserve will start tapering its bond-purchasing programs.

Liubov Georges can be reached at liubov.georges@dtn.com