Oil prices were steady on Thursday as the OPEC supply cuts along with possible US sanctions against Iran offset a drop in US stock indexes of over one per cent.  Repsol photo.

Fear of collapse of Iran deal tempering oil prices

On Thursday, oil prices shook off early losses and were steady as OPEC supply cuts and potential new US sanctions against Iran offset the sliding US equity market.

By 1:51 p.m., EDT, Brent crude futures were up 69 cents to $74.05 after falling to $72.53 earlier in the day.  US WTI futures rose by 59 cents to $68.52, after hitting $67.26/barrel earlier on Thursday.  The Canadian Crude Index rose 10 cents to $50.17.

US stock indexes fell over 1 per cent on Thursday.  Recently, oil prices have moved in tandem with equity markets, and Rob Haworth, senior investment strategist for US Bank Wealth Management told Reuters he would expect oil prices to be lower than they are currently.

However, “what’s tempering that is this fear … that we pull out of the Iran deal,” Haworth said. “All of a sudden sanctions go back on Iran and then we got even tighter supply in the market.”

The Iran deal, formally known as the Joint Comprehensive Plan of Action (JCPOA) was signed in 2015 by Iran, China, France, Russia, the United Kingdom, the United States, France, Germany and the European Union.

Under the agreement, Iran agreed to eliminate its stockpile of medium-enriched uranium, cut its stockpile of low-enriched uranium by 98 per cent, and reduce by about two-thirds the number of its gas centrifuges for 13 years.

While running for President, Donald Trump criticized the deal and after he took office, he threatened to withdraw from the deal and Reuters’ sources say he has all but decided to withdraw from the agreement.  Trump has given Congress and European allies of the US until May 12 to “fix” the deal.

France’s President Emmanuel Macron said after meeting with Trump last week that he hoped to “work on a new deal with Iran” after “frank discussions” with the US president.

In response, Al Jazeera reports Iran’s President Hassan Rouhani said “You [Trump], along with along with the leader of some European country, are deciding for an agreement reached among seven parties. Who allowed you to do that?”

After the JCPOA was signed, Iran once again became a major exporter of oil.  In December 2015, Iran produced 3.2 million barrels of oil per day.  Last January, the Middle Eastern country produced 4.474 million barrels per day.
Global crude inventories have fallen to near five-year averages, mostly due to the OPEC supply cut agreement and falling production from embattled Venezuela.  Last month, OPEC pumped about 32 million barrels per day (b/d) which is slightly below its target of 32.5 million b/d.
On Thursday, Russia reported its compliance with the OPEC pact hit 95.2 per cent, with its output sitting at 10.97 million b/d.
Production increases in the US have kneecapped significant oil price rises.  The US Energy Information Administration reported on Wednesday that US crude inventories rose by 6.2 million barrels.
US output rose to a record-high of 10.62 million b/d, slightly lower than Russia’s production.