(Bloomberg) — Oil erased its gains after the market closed following a tweet from Iran’s top nuclear negotiator that the various sides are close to an agreement that would potentially pave a path to the lifting of U.S. sanctions on Iranian crude.
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West Texas Intermediate futures fell more than $3 a barrel after commodity markets closed, trading near $90 and wiping the regular session’s 1.7% gain. Iran’s top nuclear negotiator Ali Bagheri Kani tweeted that efforts to restore the country’s nuclear deal with world powers are “closer than ever” to an agreement.
The U.S. State Department was more circumspect in its characterizations of the talks. Negotiations are in a “decisive period during which we’ll be able to determine whether a mutual return to compliance with the JCPOA is in the offing or if it’s not,” said spokesman Ned Price.
Oil futures have lurched back and forth this week with oil traders on edge trying to keep up with geopolitical updates. Tensions between Russia and the Ukraine have heightened volatility as the U.S. and NATO have warned that an invasion could be imminent. U.S. President Joe Biden has said the U.S. is ready to respond to a Russian attack with economic sanctions, which could restrict oil supplies. Russia denies it plans to attack.
The situation simmers as global demand recovers at a faster pace than crude production. The latest U.S. government data showed that oil inventories at the nation’s biggest storage hub stand at the lowest since 2018, while U.S. oil output remains far below pre-pandemic highs. Any restoration of Iranian barrels to the global market would help ease tightness as OPEC and its allies struggle to meet its output goals.
Crude is trading near the highest level since 2014 as investors bet global demand is running ahead of supply, draining inventories and forcing traders to pay steep premiums to get their hands on prompt barrels. The rally has lifted product prices, including for gasoline. That’s fanning inflation and posing a thorny challenge for leaders including U.S. President Joe Biden, as well as central bankers.
Meanwhile, a more immediate measurement of oil prices hit $100 a barrel. Dated Brent, the price of cargoes bought and sold in the North Sea, reached $100.80 a barrel on Wednesday for the first time since 2014, according to S&P Global Platts. Dated Brent reflects how traders are willing to pay up to secure actual barrels for delivery to refineries.
The steady erosion of supplies has pushed gauges of market strength to their strongest levels in years. The premium of Brent oil’s front-month contract to the second month — known as prompt timespread — expanded further after reaching the widest bullish backwardation structure since 2019 earlier this week. Spreads are typically a good indicator of underlying supply-demand dynamics, while individual futures contracts can gyrate on jitters including geopolitical risks.
(An earlier version of this story corrected a reference to day of the week.)
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