Crude prices slip on returning Iranian supply, bearish US inventory data

London — Crude oil futures were lower in the European morning trading April 8 on prospects of returning Iranian supply and bearish Energy Information Administration inventory data, following the OPEC+ decision to ease production cuts earlier in the week, analysts said.

At 11:32 GMT, the ICE Brent June futures contract was trading at around $62.92/b, down 24 cents/b from the previous day's settle, while the NYMEX light, sweet May contract was down 36 cents/b at $59.41/b.

"It's definitely trading a little heavy. The market has a lot to digest with 2.1 million barrels of additional oil till July and Iranian nuclear talks hanging over the market," Bjarne Schieldrop, chief commodity analyst at SEB Bank, told S&P Global Platts.

The headway made in the first round of indirect talks between Iran and the US over restoring the nuclear deal and lifting sanctions suggests that Iran is definitely on its way back to the market, with the prospect of extra supply weighing on prices, according to Schieldrop.

However, the relatively small slip in prices is down to the fact that Iran is already halfway back in the market, having been exporting from January to March, meaning a return of Iranian supply "is not going to be such an incredible shock," Schieldrop said.

Nevertheless, sudden success in the nuclear negotiations pose the main downside risk to prices in the near term, with the market largely expecting an agreement to take several months to a year.

In the immediate term, the US inventory data April 7 provided slightly mixed signals for the market, with crude oil stocks declining by 3.5 million barrels but builds of 4 million and 1.5 million barrels for gasoline and distillates, respectively, EIA data showed.

Eugen Weinberg, Head of Commodities research at Commerzbank saw this as brighter for fundamentals, saying the product builds was probably due to higher refinery utilization rather than weaker demand. Furthermore, the 4.04 million barrel gasoline stock build can also be attributed to a jump in gasoline imports, notably to the US Atlantic Coast, where stocks jumped 2.6 million barrels to 63.99 million barrels, putting inventories at par with the five-year average, Platts reported earlier.

Schieldrop also saw positives in the EIA data, noting that on core oil-based product inventories were inching closer to 2019 levels, and closer scrutiny of US data and mobility indexes in coming weeks could provide some upside to prices.

A slightly stronger US dollar was also playing into the weaker crude prices, but softer fundamentals posed the main downside risk, analysts said.