DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Friday's session higher after the United States and European partners paused negotiations on a nuclear deal with Iran, impeding sanctions relief for the Islamic Republic's oil exports, while growing pressure on Russia's economy and hostilities in neighboring Ukraine fanned concerns over further disruptions to global supply chains and deeper inflation in global economies.

Talks in Vienna, Austria, addressing Iran's nuclear program that Tehran has pursued since the early 2000s broke off Friday without an agreement. The European Union's chief diplomat Joseph Borrel said "a pause" is needed in ongoing negotiations due to "external factors." While not explicitly stated, it is believed that Russia upended talks with demands to soften Western sanctions on Moscow for its invasion of Ukraine.

The unexpected pause could unravel the whole deal, according to British negotiator Stephanie Al-Qaq, who called the outcome "extremely disappointing." The talks have focused on the steps the United States and Iran would take to return into compliance with the Joint Comprehensive Plan of action, which would lift most international sanctions on Iran in exchange for restrictions on Tehran's nuclear program. If oil sanctions are lifted, analysts believe Iran could quickly boost its oil exports by 700,000 barrels per day (bpd), tapping supply held in floating storage.

TankerTrackers, a company which consults satellite imagery to unveil hidden loadings, assessed Iranian crude and condensate exports of 1.4 million bpd over the last two months with most of these volumes going to China.

A diplomatic push to ease the sanction regime on Iranian oil comes as Russian crude shipments are being increasingly shunned by Western traders as a response to an unjustified war against Ukraine and its people. U.S. President Joe Biden announced on Friday that Russia no longer has the status of "most favored nation" -- an action that would allow new tariffs on Russian imports. Biden's action puts Moscow's trade relationship with the United States in the same category as North Korea and Cuba.

Escalating sanctions and tariffs on Russia, the world's second largest oil and gas producer, are raising costs for energy and food in the United States and Europe, accelerating already overheated inflationary pressure.

U.S. consumer price index surged 7.9% year-on-year in February -- the fourth straight month of inflation at a 40-year high. Nearly every category of goods and services got pricier. Gasoline costs jumped 6.6% last month and accounted for almost a third of the price hike. Grocery costs jumped 1.4%, the sharpest one-month increase since 1990 other than during a pandemic-induced price surge two years ago. The cost of fruits and vegetables rose 2.3%, the largest monthly increase since 2010.

Americans are increasingly feeling the pinch of higher oil prices in their everyday lives, according to a survey from University of Michigan, with their consumer sentiment index plunging to an 11-year low in March. The year-ahead expected inflation rate rose to its highest level since 1981 and expected gas prices posted their largest monthly upward surge in decades. Personal finances were expected to worsen in the year ahead by the largest proportion since the surveys started in the mid-1940s.

"The greatest source of uncertainty is undoubtedly inflation and the potential impact of the Russian invasion of Ukraine. In the March survey, 24% of all respondents spontaneously mentioned the Ukraine invasion in response to questions about the economic outlook," said Surveys of Consumers chief economist, Richard Curtin.

Markets breathed a sigh of relief midweek after the Russian government excluded energy from its sweeping export ban that prohibits trade of over 200 products and draw materials to all countries except for members states of the Eurasian Economic Union, Abkhazia, and South Ossetia.

Imports of Russian energy commodities are integral to the European economy, European oil refiners, and the continent's electricity generation. The EU is Russia's largest trading partner and accounts for nearly 40% of Russia's total global trade, with about half of Russia's oil exports and 70% of their natural gas exports going to Europe.

On the session, NYMEX April West Texas Intermediate rallied $3.31 to $109.33 barrel (bbl), and ICE Brent May contract advanced $3.34 to $112.67 bbl. NYMEX April RBOB futures surged 15.54 cents to $3.3121 gallon, and April ULSD futures jumped 12.14 cents to $3.4176 gallon.

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