DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced for the second consecutive session Thursday amid media reports that Iran's nuclear talks once again hit an impasse, while a bullish inventory report from the U.S. Energy Information Administration showing a steep decline in domestic crude and gasoline inventories lent further support.

Media airwaves were hit with reports Thursday suggesting Iranian demands for guarantees from the U.S. have once again stalled efforts to revive a 2015 nuclear pact, leaving Washington and European capitals unsure if a deal is possible. Tehran sent a response to the European Union, which chairs the nuclear talks, neither accepting nor rejecting an EU draft text of a deal but raising several issues Iran wanted incorporated into the agreement. The EU had said its draft was the "final text" of a possible deal when it sent it out, announcing that negotiations were over. Central to Iran's response, the Iranian negotiating team has said, are assurances it seeks that Western companies investing in Iran would be protected if the U.S. withdrew from the pact again as it did under former President Donald Trump. Iran has also floated mechanisms in the agreement that would allow Tehran to quickly increase its nuclear work if Washington quit the deal.

Arguably, Iran sells as much as 1 million barrels per day (bpd) to China and other Asian countries with some of those exports rebranded and disguised as oil sold by a third country. The government's budget plan forecasts daily sales of 1.4 million bpd for the year through March 2023 despite Western sanctions.

The European Union is clearly more interested in reaching a quick deal with Tehran than other parties to the accord, given that sanctions on Russian seaborne crude oil exports to take effect in February 2023.

Further supporting the oil complex, U.S crude oil exports hit 5 million bpd during the week ended Aug. 12, the highest on record, according to the data released on Wednesday from EIA, with West Texas Intermediate trading at a steep discount to international benchmark Brent, making purchases of U.S. crude more attractive to foreign buyers. Redirection of Russian crude flows from the European market could be one of the reasons behind the surge in crude-oil exports from the U.S. Gulf Coast. The strong pace of crude exports along with a surprise drop in U.S. oil production sent commercial crude oil stocks tumbling by 7.1 million barrels during the week ended Aug. 12, compared with expectations for inventories to rise by 100,000 barrels (bbl).

Wednesday's inventory data was also supportive for the gasoline complex, showing demand for the motor fuel climbed to the second highest rate this year at 9.348 million bpd, up 225,000 bpd or 2.4% from the previous week. On a four-week average basis, gasoline consumption was still some 4.2% below last year's four-week average of 9.466 million bpd. The recent demand figures might suggest falling prices at the gas pump, down a ninth straight week through Aug. 12, incentivize Americans to take late-summer road trips.

Other economic indicators released this week also point to steady consumer demand for purchases at stores, online and restaurants, with core retail sales, which excludes cars and gasoline, rising 0.7% in July, matching the June increase, the Commerce Department said Wednesday. The incoming data suggests Americans are maintaining their spending habits despite the highest inflation in nearly four decades.

At settlement, NYMEX September West Texas Intermediate advanced $2.39 to $90.50 bbl, while ICE October Brent futures gained $2.94 to $96.59 bbl. NYMEX September RBOB rallied 9.16 cents to $3.0261 gallon, while the NYMEX September ULSD contract added 3.23 cents to $3.6497 gallon.

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