CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were lower early Monday, with oil products down for a second session while West Texas Intermediate and Brent backed off multi-month highs as China's factory output is seen slowed by a spike of COVID-19 infections countered by dimming expectations for a renewed nuclear accord between the United States and Iran.
A wave of COVID-19 infections in China is expected to have tripped up economic growth in the world's second largest economy in June, with the outbreak having also reduced operations at the Yantian Port for a month through last week. While the Yantian Port, located in Guangdong in southeast China, has since resumed full operations, reduced operations at the port which handles a multitude of container ships including very large container ships, sparked more delays in executing global trade and worsening a container shortage.
The latest disruption in the global supply chain highlights the challenges in meeting surging consumer demand that has been met with shortages of goods and parts amid pandemic-induced economic lockdowns and plant outages.
The possibility of Washington and Tehran resolving differences that prompt a renewed Joint Comprehensive Plan of Action following the U.S. withdrawal from the agreement in May 2018 appear more daunting after the United States carried out air strikes against Iran-backed militia in Iraq and Syria. Sunday's air strikes were the second under the Biden administration, and were in response to drone attacks against U.S. personnel and facilities in Iraq.
Chances for a restructured JCPOA were reduced with the June 18 presidential win by Ebrahim Raisi, a conservative who has criticized the nuclear accord reached in 2015 by his predecessor. Raisi has expressed interest in reaching terms with Washington but has ruled out any inclusion in addressing Tehran's support for its militias in the Middle East and its growing ballistic missile program. Raisi will be sworn in as Iran's president in early August.
A sixth round of multilateral discussions over the JCPOA are set to resume in July.
On Thursday, the Organization of the Petroleum Exporting Countries, Russia and nine additional oil producing countries aligned with OPEC will meet to discuss production quotas.
OPEC+ is set to add 441,000 barrels per day (bpd) of crude oil production in July, and Saudi Arabia to finish unwinding an additional 1 million bpd in a unilateral output cut next month as previously agreed. OPEC+ is widely expected to agree to add another 500,000 bpd in crude production for the next three months beginning in August. During the height of the pandemic, OPEC+ cut crude oil production by 9.7 million bpd and will have returned 4 million bpd of those cuts by the end of July.
In early trading, NYMEX August WTI was slightly lower at $74 per barrel (bbl) after trading at $74.45 overnight, the highest trade on the spot continuous chart since early October 2018. ICE August Brent crude futures softened to $76 bbl after trading at a $76.60 33-month spot high overnight, and ahead of expiration Wednesday afternoon. September Brent is trading at an $0.80 discount.
NYMEX July RBOB futures were down 1.2 cents near $2.515 gallon ahead of expiration this week, with the August contract trading near parity. July ULSD futures were down 1 cent near $2.14 gallon, with the August contract at a 20-cent premium.
Brian L. Milne can be reached at email@example.com