Oil futures settled lower Tuesday, pressured by signs that Saudi Arabia is making progress in restoring production following attacks on processing facilities, as well as concerns over the global demand picture.
Also contributing to declines in oil prices, Iranian President Hassan Rouhani on Tuesday said he was open to discuss small changes to the 2015 nuclear deal if the U.S. lifted sanctions on his country, according to a report from Reuters.
“Rouhani’s comments are somewhat of an olive branch that could suggest we might see Iran blink first,” Edward Moya, senior market analyst at Oanda, told MarketWatch. “The sanctions are crushing the Iranian economy and this week we are seeing more European countries place the blame on Iran for the Saudi Arabia attacks.
“If Iran continues to lose European support, they may have to choose…to risk further escalation or attempt to appease Trump and deliver some tweaks to the 2015 nuclear deal,” said Moya.
West Texas Intermediate crude for November delivery
the U.S. benchmark, lost $1.35, or 2.3%, to settle at $57.29 a barrel on the New York Mercantile Exchange. November Brent
the global benchmark, fell $1.67, or 2.6%, to $63.10 a barrel on ICE Futures Europe.
Both benchmarks logged the lowest front-month contract finish since Sept. 13, according to Dow Jones Market Data.
Prices fell toward the session’s lows when President Donald Trump spoke at the United Nations. He turned up pressure on China as Washington and Beijing continue to seek a trade deal, and said all nations have a duty to act on Iran.
“Commodities did not react as much to Trump’s message as he mainly reiterated most of his policies with China and Iran,” Moya said.
Traders have also been weighing conflicting assessments over Saudi Arabia’s progress in restoring production after attacks on processing facilities on Sept. 14 cut the country’s output by around 5.7 million barrels a day.
Reuters, citing unidentified sources, on Monday reported that Saudi Arabia had restored more than 75% of crude output and expected to return to full volumes by early next week. Also Monday, The Wall Street Journal reported that it would take Saudi Arabian Oil Co., popularly known as Aramco, several months to fully restore operations.
Analysts said talk of rapid progress in restoring output would likely be taken with some skepticism, citing the planned initial public offering of Aramco.
Meanwhile, “the expectation of slowing economic growth following disappointing data” out of the European Union and China recently is “a key driver, along with the expectation that Saudi supplies will continue uninterrupted,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch.
Data Monday showed that manufacturing sentiment in the eurozone, the purchasing managers index, fell to an 83-month low of 45.6 in September, from 47 in the prior month.
In the U.S., data Tuesday showed that the consumer confidence index fell to a three-month low of 125.1 this month from 134.2 in August.
Traders also await the latest weekly data on U.S. petroleum supplies, due out from the American Petroleum Institute late Tuesday, with the much-anticipated Energy Information Administration report released Wednesday morning.
Domestic crude stockpiles are forecast to fall by 190,000 barrels for the week ended Sept. 20, while gasoline inventories are expected to have climbed by 300,0000 barrels and distillate supplies, which include heating oil, are seen down by 600,000 barrels, according to analysts polled by S&P Global Platts.
Back on Nymex, October gasoline
fell 1.8% to $1.6543 a gallon, while October heating oil
lost 1.5% to $1.9676 a gallon.
October natural gas
shed 1% to $2.503 per million British thermal units.