Crude oil futures extended the heavy losses seen overnight in mid-morning trade in Asia Oct. 28, pressured by news that Iran and Western powers were set for broader talks on the Asian country's nuclear program before end-November, setting the stage for the return of Iranian oil.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Reports of large inventory builds in the US also added pressure on prices.
At 10:09 am Singapore time (0209 GMT), the ICE December Brent futures contract was down $2.08/b (2.46%) from the previous close at $82.50/b, while the NYMEX December light sweet crude contract fell $1.80/b (2.18%) to $80.86/b.
Iran's top nuclear negotiator Ali Bagheri Kani wrote on Twitter late Oct. 27 that he had agreed to negotiations with six world powers on the country's nuclear program by end-November. This followed talks with his EU counterpart Enrique Mora on the same day.
Bagheri Kani added that an exact date would be announced next week.
The negotiations could set the stage for a lifting of sanctions, allowing up to 1.3 million b/d of Iranian oil to return to global export markets, according to some analyst estimates.
Oil prices settled lower by more than 2% overnight after the news.
"The downward pressure has continued in early morning trading today. The key catalyst for the move appears to be news that broader talks around the Iranian nuclear deal are set to resume before the end of November," ING analysts Warren Patterson and Wenyu Yao said in a note.
Nonetheless, analysts cautioned that negotiations will likely be a lengthy process and won't result in a quick return of Iranian oil to the market.
"This is just a restart of talks and the process to get a deal done will be lengthy and unlikely to lead to immediate sanction relief, which means the global energy crunch will unlikely see any immediate benefits," OANDA senior market analyst Edward Moya said.
Investors also mentioned data from the US Energy Information Administration late Oct. 27 showing total commercial crude oil stocks climbed by 4.27 million barrels to 430.81 million barrels in the week ended Oct. 22.
The build pushed stockpiles to their highest since the week ended Aug. 20, but they still remained relatively tight at around 5.6% behind the five-year average.
Gasoline stockpiles, meanwhile, declined 1.99 million barrels to 215.75 million barrels, while distillate stocks declined 430,000 barrels to 124.96 million barrels.
Inventories at Cushing fell 3.9 million barrels to 27.33 million barrels. Cushing stockpiles were at the lowest since the week ended Oct. 5, 2018, and stood more than 47% behind the five-year average for this time of year.
"A 3.9 million-[barrel] draw in Cushing could start to lead to some worries that inventories are getting close to hitting tank bottoms. Cushing has posted four consecutive draws to 27.3 million barrels, the lowest since October 2018," OANDA's Moya said.