Iran-US Nuclear Deal Drives Crude Prices Last Week
US Crude Production Declines as Cushing Continues to Pressure WTI (Part 9 of 10)
Oil price movement
Brent and WTI prices started the week on a negative note as talks of a potential nuclear deal between the US and Iran, which could put more supply in the market, intensified.
WTI decreased ~0.4% compared to Friday’s market close of $48.87 to settle at $48.68 on March 27. Brent declined 0.2% to $56.29.
The potential threat of increased crude exports by Iran caused crude prices to fall the next day as well. Crude prices capped a third straight quarterly loss on Tuesday, March 31, the last day of the quarter. WTI decreased 2.2% to settle at $47.6, while Brent decreased by ~2.1% to settle at $55.11 on Tuesday.
Prices rebounded on Wednesday, after EIA’s report for the week ended March 27 showed that US crude production had declined, which was likely a result of companies reducing active rigs in the prior months. Read more about last week’s production trends in part two of this series.
WTI gained 5% to settle at $50.09, while Brent increased by ~3.6% to settle at $57.1 on Wednesday.
Crude prices fell the next day after Iran reached a preliminary agreement with global powers, including the US, on its nuclear deal. The deal intends to block Iran from developing nuclear weapons in exchange for lifting US-led sanctions. The lifting of these sanctions means the OPEC member will be able to increase crude exports, which means more oil in the markets. This would be a bearish development for crude prices. The final deal is expected to conclude in June this year.
WTI prices declined ~2% to settle at $49.14, while Brent prices retreated ~4% to settle at $54.95 on Thursday.
Lower prices hurt the margins of companies like Continental Resources (CLR), Chevron (CVX), ExxonMobil (XOM), and ConocoPhillips (COP). CVX, COP, and XOM make up 32% of the Energy Select Sector SPDR ETF (XLE).
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