Last week President Obama publicly supported easing sanctions against Iran in exchange for an agreement on their nuclear program. Most traders thought that this signaled a deal would come at the November 20th meeting. Most market watchers were surprised when the summit ended on Thursday with no agreement, although comments were fairly positive. Crude and Brent oil climbed with Brent oil topping 111.00. In a surprise announcement late Saturday a completed signed deal with announced. Within minutes the news headlines read “Iran has struck a landmark nuclear deal with world powers in what is being billed as the most significant development between Washington and Tehran in more than 30 years. Israel’s Benjamin Netanyahu called the agreement “an historic mistake”.
Oil prices fell sharply today after world powers struck a landmark deal with Iran to curb its nuclear program in exchange for an easing of international sanctions. While Iran will not be allowed to increase its oil sales for six months, any easing of Middle East tensions tends to lead to lower crude prices. Brent oil is down $2.43 at $108.62 a barrel on the ICE futures exchange in London. Benchmark U.S. crude fell 85 cents to $93.99 on the New York Mercantile Exchange.
After marathon negotiations in Geneva, Iran on Sunday reached an agreement with the U.S., Britain, France, Russia, China and Germany to limit enrichment of uranium to 5 percent, far below the level needed for nuclear weapons.
Iran got limited relief from sanctions that have hobbled its economy, but an embargo on its oil exports remains in place while negotiations continue for a more enduring deal to ensure the country only uses nuclear technology for peaceful purposes such as power generation.
If Iranian oil returns to international markets, the additional supply is likely to make crude less expensive. U.S. crude is down from about $110 in October because of ample supplies and muted demand.
Crude oil slipped lower during early European trading hours on Friday, but remained within close ranged of a three-week high following the release of positive U.S. economic reports on Thursday. Oil price (WTI and Brent) rallied last week: WTI rose by 1.07%; Brent oil increased by 2.3%. As a result, the gap of Brent oil over WTI widened again: The premium ranged between $13.58 and $16.21 – the highest range since March 2013. Last week, the EIA’s weekly report showed a sharp fall in oil’s stockpiles by 11.7 million barrels.
Natural gas continues to surprise traders climbing by 72 points this morning to trade at 3.884. Natural gas has been on the upswing ever since the US northeast and Midwest were blanketed by an unexpected storm and cold spell. Accuweather updated its near term forecast to call for colder weather over the Thanksgiving holiday weekend. Natural gas is heating up again as its price rallied last week. Based on the recent EIA update, part of the rise could be attributed to the first extraction from storage for this season buildup: the storage extraction was 45Bcf. This week’s extraction was higher than last year’s pace.