London — Oil was steady on Wednesday, trading in a narrow range, supported by optimism about improving US fuel demand and a weak dollar, but with the prospect of a return of Iranian oil to markets putting pressure on prices.
Brent was 14 US cents, or 0.2%, higher at $68.79 a barrel by 8.39am GMT, and US West Texas Intermediate (WTI) crude was up 1c, or less than 0.1%, at $66.08 a barrel.
“Physical demand has been improving in both Europe and the US as a slowdown in new Covid-19 cases has been pushing up mobility,” said ING analyst Warren Patterson.
The northern hemisphere’s summer driving season and a lifting of coronavirus curbs have pushed up the demand. As a result, US crude oil and fuel inventories fell last week, said two market sources, citing American Petroleum Institute figures.
Crude stocks fell by 439,000 barrels in the week ended May 21. Petrol inventories fell by two-million barrels and distillate stocks fell by 5.1-million barrels, the data showed, according to the sources.
The dollar languished near multi-month lows after Federal Reserve officials reaffirmed a dovish monetary policy stance, reassuring investors worried about the prospect of rising inflation.
Market players are also closely watching developments in Iran-US nuclear talks which could lead to the lifting of sanctions on the Iranian energy sector and the return of Iranian barrels to market.
Iran’s government spokesperson, Ali Rabiei, said he was optimistic over Tehran reaching an agreement soon, although Iran’s top negotiator cautioned that serious issues remained.
Iran and global powers have negotiated in Vienna since April to work out steps that Tehran and Washington must take on sanctions and nuclear activities to return to full compliance with the 2015 nuclear pact with world powers.
Analysts have said Iran could provide about one-million to two-million barrels per day (bpd) in additional oil supply if a deal is struck and sanctions lifted.
“In our view, the fundamental situation on the oil market remains balanced,” said Commerzbank analyst Eugen Weinberg.
“Thanks to the good sentiment on the financial markets, the price momentum suggests that Brent will make a renewed bid for the $70 per barrel mark in the next few days.”