Peak Oil Notes – Apr 2

As the Iranian nuclear talks moved into yet another overtime, the oil markets became more volatile with New York crude jumping 5.2 percent on Wednesday to close at $50.09 a barrel. London climbed 3.6 percent to settle at $57.10. Mixed signals coming out of the negotiations make it difficult to judge whether there have been enough concessions from long-held positions that an agreement can be signed by the end of June.  The oil markets had been weaker Monday and Tuesday on expectations that an imminent agreement would quickly lift some of the sanctions and permit Tehran to dump on the market the 30 million barrels of crude it is supposed to have stored on tankers. When no agreement was reached by the 31 March deadline, the markets, helped by a weaker dollar, turned bullish.
 
The next few days should tell whether a deal can eventually be reached or whether the talks are going to collapse.  The two sides are still far apart on several key issues. Tehran is unlikely to get the sanctions removed without major concessions that so far it is not willing to make. Even if a preliminary deal is announced in the next few days, it is likely that many significant issues will still remain to be negotiated before the current final deadline for the talks at the end of June.  For now most knowledgeable observers are putting the chances of success at 50-50.
 
The weekly stocks report, which showed US crude inventories up by 4.8 million barrels, was not enough to offset the possibility that the talks would fail and that the sanction would continue keeping the additional Iranian oil off the market. The EIA also reported its “estimate” that US oil production fell last week, which gave heart to those expecting a big price increase in the next six months due to falling US production.
 
New data released on Wednesday shows that the US economy is not doing well despite help from the markedly lower fuel costs. Private employment is not growing as expected and factory activity is at a two year low suggesting that US economic growth slowed in the first quarter. This news may prompt the Federal Reserve to delay increasing interest rates before fall.
 
There has been considerable military activity in the Middle East this week. Baghdad’s forces have pushed ISIL out of Tikrit; however, ISIL has just taken over a large Palestinian refugee camp on the outskirts of Damascus. In Yemen, Houthi forces have pushed their way into parts of Aden, increasing the likelihood that Saudi ground forces will be intervening in the situation soon.
 
In Nigeria, the victory of the opposition candidate, Muhammadu Buhari, raises the possibility that the rapidly deteriorating situation in the country may stabilize.