0308 GMT: Crude oil futures edged higher during mid-morning trade in Asia May 25, extending overnight gains, as some uncertainty emerged over the restoration of the Joint Comprehensive Plan of Action on Iran, and as optimism grew that the market would be able to absorb any increases in Iranian oil exports if an agreement was reached.
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At 11:08 am Singapore time (0308 GMT), the ICE Brent July contract was up 23 cents/b (0.34%) from the previous settle at $68.69/b, while the July NYMEX light sweet crude contract was 14 cents/b (0.21%) higher at $66.19/b.
Market participants remained focused on the prospect of the restoration of the JCPOA, with the fifth round of negotiations scheduled to resume in Vienna later May 25.
Iranian Foreign Ministry Spokesman Saeed Khatibzadeh said that differences between Iran and world powers remain in talks to reinstate the JCPOA, echoing comments made by US representatives last week and stirring up a degree of uncertainty as to whether a deal will soon be reached.
Nevertheless, the likelihood of the deal remains high, with JCPOA negotiations clearing a major hurdle on May 24, when the International Atomic Energy Agency announced a one-month extension of its agreement with Tehran for access to recordings to continue monitoring Iran's nuclear activities. The IAEA's access to nuclear site image recordings has been a major sticking point, with western authorities saying it is critical in order for the JCPOA to be reinstated.
Iran also seems to believe that a deal will soon be reached, with estimates from data intelligence firm Kpler suggesting that the country is preparing for a sizeable increase in output and exports. Iranian oil on floating storage has more than doubled since the inauguration of US President Joe Biden in mid-January, with Iran's oil tankers were holding around 32 million barrels of crude and condensate at sea in the week beginning May 24, according to the data.
The threat of increased Iranian exports is tempered by expectations that sanctions on Iran's oil sector will likely be eased in a piecemeal manner, as Washington will want to ensure that it retains some leverage on Tehran, according to analysts.
Furthermore, investors believe that an increase in Iranian exports will feed directly into rising oil demand, which is expected to come as vaccination drives around the world pick up pace and as global economic activity rebounds. Platts Analytics expects global oil demand to rebound by 5.5 million b/d in 2021 from 2020 levels.
"With economic growth continuing to recover, and the market approaching the seasonal peak in demand, it will be in a much stronger position to handle any additional oil," ANZ analysts said in a May 25 note.