Crudes Bounce Off 6-Month Low as Traders Monitor Iran Talks

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange extended losses into early morning trade Tuesday, with both benchmarks trading at their lowest levels since late January as traders seek clarity on the progress of the Iranian nuclear talks that could add up to 1 million barrels of additional oil into the global market at the time when major economies of Europe, North America and Asia are struggling to regain momentum.

Iran delivered its deadline response to the final proposal of the E.U.'s nuclear deal and anticipates the response from the other side within two days, according to the wire services. Al Jazeera citing sources familiar with Iranian negotiators reported Tuesday morning the response does not include the demands to remove the Islamic Revolutionary Guard Corps from the U.S. list of foreign terrorist organizations and for the International Atomic Energy Agency to drop investigations into undeclared nuclear sites. Those are believed to be two sticking issues for the parties to revive the 2015 nuclear accord. It remains unclear, however, whether Iran has agreed to the concessions required by the U.S. and European negotiators. On Twitter, Iran's negotiating team adviser Mohammad Marandi said Tehran had "expressed its concerns" about the draft but the "remaining issues are not very difficult to resolve." The U.S., Iran, Russia, China, the U.K., Germany and France have been negotiating the steps for restoring the 2015 nuclear accord since spring 2021. The accord, officially known as the Joint Comprehensive Plan of Action, placed tight but temporary restrictions on Tehran's nuclear program in exchange for lifting most international sanctions on Iran.

While Iran doesn't publish figures for oil production or exports, analysts estimate it already sells as much as 1 million barrels per day (bpd) to China and other Asian countries that is being rebranded and disguised as oil sold by the third country. The government's budget plan forecasts daily sales of 1.4 million bpd for the year through March 2023 despite Western sanctions.

In financial markets, investors are awaiting the release of U.S. industrial production data for July scheduled for 9:15 a.m. EDT, with analysts expecting a 0.3% increase in headline production and a 0.2% rise for manufacturing output, compared with respective declines of 0.2% and 0.5% in the earlier month. This follows a rather shocking decline in manufacturing activity across New York state, according to 200 firms responding to the August 2022 Empire State Manufacturing Survey. The headline general business conditions index plummeted 42 points to -31.3. A level above 0.0 indicates improving conditions, below indicates worsening conditions. New orders and shipments plunged and unfilled orders declined. Delivery times held steady for the first time in nearly two years and inventories edged higher. While still elevated, the prices paid index moved lower and the prices received index held steady. Looking ahead, firms did not expect much improvement in business conditions over the next six months.

Earlier this week, oil futures came under heavy selling pressure from a set of bearish economic data out of Chia that showed industrial production and retail sales failed to pick up growth momentum last month. Battered by COVID-19 lockdowns, China's industrial output rose 3.8% from a year ago, lower than June's 3.9% and missing economists' forecast of a 4.3% increase. Oil refining also fell as plants shut for maintenance. Retail sales also grew at a much slower-than-expected pace of 2.7%, compared with expectations for a 5% advance, pointing to weakness in China's consumer spending. The overall jobless rate fell to 5.4% from 5.5% but unemployment rate among 16 to 24 years old have jumped to 19.9% -- the highest on record.

Furthermore, data also showed China's apparent oil demand last month was about 10% lower, year-on-year.

Near 7:30 a.m. EDT, nearby-month delivery West Texas Intermediate jumped above $90 barrel (bbl) and the ICE Brent contract for October delivery gained $0.27 to $95.36 bbl. NYMEX September RBOB edged up 0.43 cents to $2.9560 gallon, while the NYMEX September ULSD contract advanced 4.91 cents to $3.4894 gallon.

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

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

Liubov Georges