Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordan
Oil slipped after posting its biggest gain in more than a week on Monday as investors monitored US-Iran nuclear talks and the outlook for demand amid an economic slowdown.
West Texas Intermediate futures dropped to trade near $90 a barrel after closing 2% higher in the previous session. Uncertainty around Iranian supply aided crude’s drift higher with a conclusion to the long-running nuclear talks edging nearer after European Union diplomats presented the US and Iran with a final draft accord to revive the 2015 deal.
Futures remain less than $5 above a six-month low and thin volumes are likely to keep prices volatile. Crude may continue to weaken before rallying in winter as the US winds down releases from strategic stockpiles and an EU embargo on Russian supplies takes effect, Energy Aspects said Monday.
"Oil’s risk is skewed to the downside with both macro and fundamentals showing weakness,” said Gao Jian, a Shandong-based analyst with Zhaojin Futures Co. Time spreads and refining margins are among the bearish signals, while the return of Iranian oil would also push prices lower, he added.
Oil has been buffeted by volatile trading in recent months as concerns about a global slowdown hurt demand and offset signals that physical supply is still tight. Traders will be keeping a close eye on consumption, with data over the weekend showing China’s crude imports rose in July from the lowest in four years, while falling US retail gasoline prices may stimulate increased driving.
While oil markets remain in backwardation -- a bullish pricing pattern -- key differentials have narrowed, suggesting an easing of tightness. Brent’s prompt spread, the difference between its two nearest contracts, was $1.54 a barrel on Tuesday, down from $1.90 a week earlier.
A deluge of market commentary this week may offer further direction, with the Energy Information Administration set to issue its short-term outlook later on Tuesday. Monthly snapshots from producer group OPEC and the International Energy Agency will follow on Thursday.
