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Crude oil futures rise as JCPOA restoration seems unlikely in near term

0256 GMT: Crude oil futures rose during morning trade in Asia June 15, as the restoration of the Joint Comprehensive Plan of Action seemed increasingly difficult, and as strong oil demand in the West remained a pillar of support for the market.

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At 10:56 am Singapore time (0256 GMT), the ICE August Brent futures contract was up 11 cents/b (0.15%) from the previous settle at $72.97/b while the NYMEX July light sweet crude contract was up 10 cents/b (0.14%) at $70.98/b.

The rise in prices comes after the threat of additional Iranian oil flowing into the market dulled for the near term, with Iran's deputy foreign minister Abbas Araghchi telling media outlets that JCPOA negotiations are unlikely to conclude this week prior to Iran's presidential elections on June 18.

"If talks drag on, there is the potential for a new government taking a different approach with the negotiations, which could possibly further delay any deal," ING's head of commodities strategy Warren Patterson and senior commodities analyst Wenyu Yao said in a June 15 note.

"We are assuming that Iranian supply increases from 2.4 million b/d currently to 2.6 million b/d over Q3 2021 and then to 3 million b/d in Q4 2021. If talks do drag on into H2 2021, this supply is at risk," the ING analysts added.

Market analysts have said that if an increase in Iranian supply does not materialize in the near term, the OPEC+ coalition will have to open up its taps further in order to meet the anticipated rise in demand.

The coalition, which last met on June 1, has decided to increase its production levels by 840,000 b/d July onward, but beyond August, the OPEC+ supply accord calls for quotas to be held steady through April 2022.

Meanwhile, crude demand in the western hemisphere is already robust.

Prior to the release of inventory reports from the American Petroleum Institute and the US Energy Information Administration on June 15 and June 16, respectively, analysts surveyed by S&P Global Platts have said that rising refinery demand is expected to have pulled US crude stocks 4.1 million barrels lower in the week ended June 11.

This counter-seasonal draw would have left stocks nearly 4% behind the five-year average of EIA data, opening up the widest deficit since July 2018.

Against the backdrop of a strong demand outlook, the market dismissed the EIA's forecast of higher unconventional oil and gas production.

The EIA on June 14 revised its June unconventional crude production estimate upward by 32,000 b/d from its previous June projection to 7.765 million b/d, which is also an increase from its outlook for May at 7.707 million b/d. In July, the EIA sees unconventional crude output jumping to 7.803 million b/d.

Some concerns in Europe remain, however, especially after UK Prime Minister Boris Johnson announced that the UK will extend pandemic restrictions for up to four weeks to curb the surge in COVID-19 infection numbers driven by the more transmissible Delta variant.