DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange accelerated losses early Monday, sending the international crude benchmark towards $73 bbl as investors assess supply balances amid stronger-than-expected crude exports from Russia, Iran and Venezuela among others that are seen offsetting a 1-million bpd production cut introduced by Saudi Arabia.

The oil complex kicked off the new trading week with another wave of selling after investment bank Goldman Sachs revised lower its price forecast for Brent and WTI through 2024. The bank now believes oil prices will end this year at $86 bbl, down from its earlier forecast of $95 bbl. For 2023, Goldman forecasts an average price of $82 bbl, compared to its prior $88 bbl forecast. Driving the revisions are stronger-than-expected supplies from Russia, Iran and Venezuela that are seen circumventing sanctions in recent months. Goldman Sachs revised its supply forecast for all three countries through 2024. The Saudi plan to slash output by 1 million bpd from July will only partly offset that increased supply, Goldman said in a Sunday note.

For context, Russian crude oil exports have fully recovered to pre-war levels despite the decision by many companies to stop buying Russian oil and a ban of Western financial and logistical services. S&P Platts Global Commodities estimates Russia-origin seaborne oil flows averaged 3.76 million bpd last month -- the highest since April 2022 and almost 20% above the pre-war level of 3.1 million bpd. Iranian exports have also risen, partly on the back of a recovery in Chinese demand, while Venezuelan production has edged higher following new production and export licenses re-introduced in November 2022.

Further adding to the bearish sentiment, regional news outlets in the Middle East reported last week the United States and Iran may be nearing a temporary nuclear deal that could un-sanction Iran's oil exports, adding large supplies of crude to the global market.

Although the White House quickly dismissed media reports of a breakthrough, the oil complex remains under pressure as markets assessed the potential for a nuclear deal to be reached in the coming weeks. Israel's Haaretz and other regional outlets cited high-ranking Israeli officials who said the talks are moving forward more quickly than expected, with the possibility for the two sides to reach an agreement as early as June. Iran could restore about 1 million bpd of crude oil production within months of a deal, traders and analysts said last year before talks broke down. It could be back to full capacity of about 3.7 million bpd by next year. The Persian Gulf country's oil exports already climbed to about 1.3 million bpd in November, and last month held near the highest in four years, according to data from Vortexa Ltd.

The fact that OPEC+ announced two production cuts in less than two months on top of a reduction of 2 million bpd unveiled late last year highlights its failure to jawbone prices higher against centrifugal forces of the global economy.

Manufacturing industries in China, the United States and European Union Western, accounting for a large chunk of global oil demand, fell into recession late last year and in recent months have shown few signs of improvement. For context, the U.S. manufacturing sector contracted in May for the seventh straight month and is now at the lowest level since the early days of the COVID pandemic in May 2020. The index has already been below 50 for longer than in most mid-cycle slowdowns, generally eight months or fewer. The forward-looking new orders component slumped to just 42.6 in May, signaling activity is likely to continue falling for several more months at least.

Near 7.30 AM ET, NYMEX WTI July futures declined $1.12 to $70.17 bbl, while the front-month August contract for the Brent international crude benchmark fell $1.37 to $73.40 bbl. NYMEX RBOB July futures declined $0.0289 to $2.5643 gallon and ULSD July futures dropped to $2.3360 gallon.

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