- Crude oil futures were higher in mid-morning trade in Asia March 16.
- The prospect of lengthy lockdowns in Chinese cities may cast a shadow over crude oil prices.
- Iran nuclear deal seems to be on track again after Russia’s Foreign Minister Sergei Lavrov said he had received written guarantees from the US that Russia-Iran trades would not be affected by sanctions.
Crude oil futures were higher in mid-morning trade in Asia March 16 as market participants weighed the impact of China’s worsening COVID-19 outbreak on demand and signs of progress in the stalled Iran nuclear deal on supply, says an article published on sp global website.
Crude oil futures were higher in mid-morning trade
At 11 am Singapore time (0300 GMT), the May ICE Brent futures contract was up $1.27/b (1.27%) from the previous close at $101.18/b, while the April NYMEX light sweet crude contract was 90 cent/b (0.93%) higher at $97.34/b.
Lockdowns may cast a shadow over crude oil prices
China has sent nearly 30 million people into lockdown in an effort to contain its worst coronavirus outbreak since early 2020, spurred by the highly-transmissible omicron variant.
The government has locked down Shenzhen city and Jilin province, while largest city Shanghai is under a slew of pandemic-related restrictions, as the country pursues a “zero-COVID policy,” local media reported.
“China is the world’s largest oil importer… the country alone accounts for a quarter of global oil imports, therefore its economic development tends to have an outsized impact on energy demand,” Dailyfx strategist Margaret Yang said in a note March 15.
“The prospect of lengthy lockdowns in Chinese cities may cast a shadow over crude oil prices in the weeks to come,” she added.
Iran nuclear deal seems to be on track again
Meanwhile, the stalled Iran nuclear deal seems to be on track again after Russia’s Foreign Minister Sergei Lavrov said he had received written guarantees from the US that Russia-Iran trades would not be affected by sanctions, a demand that the US was previously unwilling to provide.
“We received written guarantees. They are included in the text of the agreement itself on the resumption of the Joint Comprehensive Plan of Action on the Iranian nuclear program,” Lavrov said at a press conference in Moscow with his Iranian counterpart Hossein Amir-Abdollahian.
“It seems as though there could be progress in Iranian nuclear talks,” ING analyst Warren Patterson said in a note March 16.
“Russia has said it has received US guarantees that sanctions will not affect the supply of Russian fuel to Iran’s nuclear plants. This has been one of the sticking points and, if resolved, would mean that we are one step closer to a deal, and as a result nearer to Iranian oil supply increasing,” Patterson added.
If an Iran nuclear deal can be reached, S&P Global estimates that full sanctions relief by May could lift Iranian production by 750,000 b/d by August, plus enable around 300,000 b/d of exports from storage. Within a year, some 1.5 million b/d of Iranian oil exports could return to the market.
At 11 am Singapore (0300 GMT), the May Dubai Exchange of Futures for Swaps was pegged at $8.79/b, down from $9.77/b at the Asia close March 15. The EFS is an indicator of North Sea low sulfur crude value versus Middle East high sulfur crude, and a wider EFS makes crude priced against Dubai more economically attractive compared to Brent-linked ones.
Intermonth spreads also narrowed in mid-morning trade in Singapore.
The April-May Dubai swap intermonth spread was pegged at $3.13/b, narrowing from $3.35/b at the close of Asia trade March 15, while the May-June spread was pegged at $1.55/b, narrowing from $1.69/b over the same period.
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Source: sp global
