Oil prices are expected to increase further this week due to delays in the Iranian nuclear talks and the return of Iranian crude oil to global markets, which are already suffering from Russian supply disruptions.
National Oil Corporation (NOC) said on Sunday that the closure of El Feel and Sharara oilfields in Libya resulted in a loss of 330,000 barrels per day (bpd), which also boosted crude prices. OPEC member Libya produced roughly 1.2 million barrels of crude a day in 2021, according to U.S. energy data.
The talks to revive Iran’s nuclear deal with world powers were mired in uncertainty on Sunday after Russia asked the U.S. for a guarantee that the sanctions it faces over the Ukraine conflict will not harm its trade with Tehran. China has also reportedly raised new demands.
Responding to Russia’s demands, U.S. State Secretary Antony Blinken explained Sunday that the sanctions imposed on Russia over its invasion of Ukraine are unrelated to a potential nuclear deal with Iran.
The Brent benchmark rose 21% to close at $118.11 a barrel last week, and U.S. crude climbed 26% to close at $115.68, levels not seen since 2013 and 2008 as Russia struggled to sell oil amid fresh sanctions.
According to Amrita Sen, co-founder of Energy Aspects, a think tank, the Iranian deal was the only major bearish factor hanging over the market. If the Iranian deal were delayed, the market could bottom out faster. This is especially true if Russian barrels remain off the market for a long time.
Sen said Brent could rise to $125 per barrel on Monday, quickly approaching an all-time high of $147, last seen in 2008.
Daniel Yergin, author and vice chairman of S&P Global said this week, ahead of the CERAWeek conference in Houston, that oil could soar to $185 per barrel this year.
We do not intend to sanction oil and gas because of their essential nature, but oil is getting sanctioned because private players are not picking it up or ports are not receiving it, and the longer this goes on, the more supply chains will crumble, said Yergin.
Efforts are underway to ban Russian oil imports by the United States and European partners, US State Secretary Antony Blinken said on Sunday, but he emphasized the importance of maintaining steady oil supplies worldwide.
Around 7 million barrels of oil and refined products are exported by Russia each day or 7% of the world supply. Some volumes of Kazakhstan’s oil exports from Russian ports have also faced complications.
Even if Iran reaches a nuclear deal, it will take several months to restore oil flows, analysts
The Eurasia Group maintains a 70% probability that a nuclear deal can be reached despite new Russian demands.
Russia may plan to use Iran to bypass Western sanctions, but a written guarantee allowing it to do so is probably beyond Washington’s capability in the midst of a full-scale war in Ukraine, said Eurasia’s Henry Rome.
In According to AAA, an automobile association, the average price of gasoline in the U.S. hit $4.009 on Sunday, the highest level since July 2008. The average consumer is now paying 40 cents more than a week ago, and 57 cents more than a month ago.
United States officials met with Venezuelan officials on Saturday, hoping to determine whether Caracas is ready to distance itself from its close ally, Russia.