Crude prices slide amid reports of Iran nuclear deal progress

New York — Crude futures settled lower May 18 amid reports of progress on US-Iran nuclear talks.

NYMEX June WTI settled down 78 cents at $65.49/b, and ICE July Brent was 75 cents lower at $68.71/b.

Oil futures, which had been holding around even in morning trading, moved sharply lower following media reports quoting Russia's ambassador to the International Atomic Energy, Agency Mikhail Ulyanov, stating the two sides had made "significant progress" towards a deal and that an "important announcement" will be made on May 19.

The news sent Brent futures as low as $67.28/b, down 3.2% from their May 17 settle, while WTI hit $65.49/b, down 1.1% from the session prior. But prices quickly stabilized after Ulyanov clarified that there are still unresolved issues to address.

"I didn't say there was a breakthrough at the Vienna talks on [the Joint Comprehensive Plan of Action nuclear deal]. I said that significant progress have been achieved, in my view. That is true. But unresolved issues still remain and the negotiators need more time and efforts to finalize an agreement on restoration of JCPOA," Ulyanov said on Twitter.

Still, sources familiar with the US-Iran nuclear talks told S&P Global Platts that there is a push to get a deal done by May 21.

"Given that we were right at the top of the recent trading range this gave every energy trader permission to get out and that's why we saw a pronounced drop on just the announcement of an announcement," OANDA senior market analyst Edward Moya said, adding: "The Iran story has been brewing for quite some time, and eventually we will see the oil market absorb this. [A deal] probably takes down end-of-year targets for oil by a couple dollars, but shouldn't derail the overall bullish outlook."

On May 17, front-month WTI settled at the highest since April 23, 2019, while front-month Brent last was strongest since March 11.

Iran, under heavy sanctions by the US, appears increasingly emboldened as indirect talks progress toward a reinstatement of the nuclear deal, ratcheting up production in recent months and finding a steady customer in China, according to market sources. The country's total output reached 2.43 million b/d in April, up 130,000 b/d from March and the highest since May 2019, according to the latest S&P Global Platts survey released May 10.

Iran would then be able to return to presanction oil production of about 3.9 million b/d next year, analysts predict.

Crude futures were trading around even ahead of the midday selloff but were considerably stronger overnight amid bullish demand outlooks for the US, Europe and China.

ICE Brent futures had traded up to $70.24/b, while front-month WTI briefly reached $67.01/b, both the highest intraday levels since March 8.

RBOB firm on Colonial disruptions

NYMEX June RBOB settled up 26 points at $2.1609/gal on May 18, while June ULSD declined 40 points to $2.0564/gal.

RBOB futures saw a late-session rally amid reports that Colonial Pipeline's communications system for shippers was experiencing problems, again disrupting operations even though the petroleum products artery is up and running again after being halted for nearly a week following a cyberattack.

Refined products shippers were unable to make nomination changes on Colonial May 18, despite the line resuming normal operations May 13, sources said.

The ICE New York Harbor RBOB crack versus Brent climbed to 21.74/b in afternoon trading, on pace for the highest close since August 2017.

Colonial halted all pipeline operations May 7 because of a ransomware attack, restricting the primary artery for gasoline and refined products from delivering more than 100 million gal/d of fuels. Colonial stretches more than 5,500 miles from the Houston refining hub to New York Harbor, supplying about 45% of all the gasoline and diesel fuel consumed on the East Coast.