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Oil Rises as Confidence Fades Over Quick Return of Iran Supply

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(Bloomberg) Oil hit a 32-month high as the rollout of coronavirus vaccines boosted demand expectations for Europe and the U.S., and confidence faded over a quick return of Iranian crude supply.

Futures rose 0.9% in New York, building on a run of three weekly gains. Iran’s foreign ministry said Monday there was “very little time left” for world powers to resolve outstanding differences to revive a 2015 nuclear deal, even though an agreement was in place to remove sanctions on the country’s energy sector. Iran goes to presidential elections this week.

There were expectations a deal to lift Iranian oil sanctions would be in place ahead of the vote, said Giovanni Staunovo, a commodity analyst at UBS Group AG. “That seems not to be the case anymore.”

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Both WTI and Brent have risen above $70 a barrel as demand picks up

Oil has surged in recent weeks as road traffic in the U.S. and Europe increase with more people vaccinated against Covid-19. American daily air travelers topped 2 million for the first time since the pandemic began. That’s boosting oil demand, which may already be high enough to absorb any additional supply into the market, Staunovo said.

Crude has digested a lot of incremental, bullish news over the past week, with the U.S. and Europe reopening, according to Vandana Hari, founder of Vanda Insights. Prices could creep higher over the coming weeks but “at a more gradual pace,” with the market awaiting fresh momentum, Hari said.

  • West Texas Intermediate for July delivery rose 62 cents to $71.53 a barrel as of 9:27 a.m. London time
  • Brent for August rose 1.1% to $73.49 a barrel

Iran’s Deputy Foreign Minister Abbas Araghchi cast doubt over the weekend on the chances of reviving the nuclear deal before the elections on June 18. Ebrahim Raisi, the hardline cleric widely tipped to replace President Hassan Rouhani, said that he’ll continue the negotiations if elected, but he won’t treat them as a major national concern.

Related coverage:
  • Money managers have boosted their WTI bets to the most bullish in about three years.
  • Iraq, OPEC’s second-biggest oil producer, said crude will trade between $68 to $75 a barrel in the second half.
  • Environmentalists emboldened by the defeat of Keystone XL are pushing U.S. President Joe Biden to revoke permits for other pipelines.

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