Oil futures fell on Monday, pressured by expectations that talks over Iran’s nuclear program could result in an easing of sanctions against the crude exporter. Prices also headed lower as the turmoil in Yemen looked unlikely to disrupt oil transport in the region.
Crude for delivery in May fell 19 cents, or 0.4%, to close at $48.68 a barrel on the New York Mercantile Exchange. May Brent crude on London’s ICE Futures exchange fell 12 cents to $56.29 a barrel.
Nymex crude had dipped as low as $47.65 a barrel, but trimmed some losses after Russian Foreign Minister Sergei Lavrov left the negotiations in Switzerland to return to Moscow, a move that suggested a preliminary deal with Iran isn’t imminent. News reports said Iran is balking at a provision that would see it ship nuclear fuel out of the country. Tuesday is the deadline for an agreement. “Any deal which provokes the unwinding of oil-related sanctions — regardless if over a protracted period — will likely spur a bearish reaction, while the absence of a deal will likely encourage a knee-jerk short-term bounce,” said Matt Smith, a commodity analyst at Schneider Electric.
Iran currently exports around one million barrels of oil a day, but has been producing in excess of three million barrels a day at various times over the past year and storing this in tankers and onshore facilities, ANZ Research said, adding that the country may have a stockpile of over 30 million barrels. Prices had surged last week after Saudi Arabia and its allies launched airstrikes against Iran-linked Houthi militants in Yemen. But the threat of a potential disruption to oil supplies due to the conflict now looks increasingly remote, with the fighting taking place far from areas where oil tankers pass through. “Just like most geopolitical events, the initial gains quickly eroded without any physical disruption,” a Morgan Stanley report said.
Investors were also worried that the Saudi strike on Iran-backed rebel groups in Yemen may jeopardize the talks over Iran’s nuclear program, but those fears appear misplaced, analysts said.