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Crude oil exports out of Iran have surged to five-year highs despite U.S. sanctions, signaling something of a resurgence for the country on the world stage but also sapping confidence in an oil market already weakened by lackluster global economic growth and cheap Russian cargoes.
Iranian crude shipments doubled since last fall to reach 1.6M bbl/day in May, analysts at Kpler reported Friday, the highest level since sanctions were re-imposed in 2018.
Iran has said it has raised its total crude production to above 3M bbl/day, which would equal ~3% of global supply and the highest since 2018.
As a result, attempts by Saudi Arabia and some other OPEC+ members to backstop falling oil prices with a series of production cuts have largely failed, as Brent crude drifted earlier in the week to $71.84/bbl, its lowest settlement in 18 months.
The U.S. and Iran reportedly have been inching toward an understanding to free American prisoners and explore limits on Iranian nuclear research, possibly in exchange for leeway to ship more crude.
“A deal between the U.S. and Iran would really upset the oil applecart,” said Michael Lynch, president of Strategic Energy & Economic Research, and it is not surprising that talks are reportedly “being done quietly, given all the opposition in both countries to any agreement.”
Crude prices rose this week following back-to-back declines, as expectations for more stimulus in China outweighed concerns over higher interest rates in the U.S. and Europe.
For the week, Nymex front-month crude oil (CL1:COM) for July delivery settled +2.3% to $71.78/bbl, and August Brent crude (CO1:COM) closed +2.4% to $76.61/bbl.
Also this week, front-month July U.S. natural gas (NG1:COM) surged +16.7% to $2.632/MMBtu, its best weekly showing since early March.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (DBO), (USL), (DRIP), (GUSH), (USOI), (NRGU)
Despite the gains in oil and gas, energy (NYSEARCA:XLE) was the only S&P sector to show a loss this week, -0.6%.
Top 10 gainers in energy and natural resources during the past 5 days: (NEXT) +30.3%, (PPSI) +24.7%, (EOSE) +23.2%, (BAK) +19.2%, (NETI) +18%, (SLDP) +16.8%, (YPF) +15.9%, (CENX) +15.6%, (PLUG) +15.2%, (ERO) +14.1%.
Top 5 decliners in energy and natural resources during the past 5 days: (VGAS) -15.8%, (CETY) -13.9%, (WAVE) -12.2%, (ATLX) -11.3%, (NEXA) -11%.
Source: Barchart.com
