Oil prices have exceeded $73 a barrel, after recent talks between the major powers and Iran over its nuclear program ended without a deal.
Futures contract for Texas Intermediate crude in New York have witnessed a rise above $72 a barrel, while Brent rose again towards $74 a barrel, after gains for the fourth consecutive week.
Diplomats have postponed the sixth round of meetings due to major loopholes remaining before the deal is reformed. This is the third time since talks began in April that negotiators have missed their deadlines for renewing the nuclear deal.
Reviving the deal is likely to ease US sanctions and increase crude oil flows.
However, the election of conservative cleric Ebrahim Raisi as Iran’s president may complicate future talks. Raisi is under US sanctions, while Tehran insists that al sanctions should be removed as part of reviving the deal.
Crude oil is up nearly 50% this year, with major economies emerging from restrictions and lockdowns after expanding Covid-19 rollout campaigns around the world.
Demand has rebounded, especially in the United States and parts of Asia.
China’s oil consumption has surpassed pre-pandemic levels and India is also showing signs of recovery from the deadly second wave of the virus that has undermined its economy.
“The market is quickly coming around to the view that, with demand rebounding so strongly over the northern hemisphere summer, additional supply will be required,” said Daniel Hynes, senior commodities strategist at Australia and New Zealand Banking Group Ltd.
“With OPEC remaining cautious and little chance of Iranian oil hitting the market soon, the market looks likely to remain fairly tight in the next few months.”
For the first time since the beginning of the pandemic, yesterday, empty oil tanks were offered for rent at the delivery point for West Texas oil futures, in Cushing, Oklahoma, starting in early July.
This is a new sign of the recovery in demand for oil, after many months of filling tanks with crude.
There is currently a storage capacity of about 1.4 million barrels of oil at a cost of 12 cents a barrel per month, according to Tank Tiger.
This cost is about 80% less than the cost of storage a year ago, which amounted to 60 cents a barrel per month, when storage capacity was almost non-existent.
In addition to the recovery in demand, what contributes to the use of stored oil is that shale oil producers focus on balancing their books and enhancing returns for shareholders rather than increasing production, which remains 15% lower than last year’s peak.