Oil prices extended declines on Thursday after Iran and world powers agreed to resume nuclear talks this month that could lead to the removal of U.S. sanctions on Iranian oil, increasing global supplies.
U.S. West Texas Intermediate crude slid for a third day to $80.18 a barrel by 0551 GMT, down 68 cents, or 0.8% after slipping under $80 earlier. Brent crude futures for January fell for a second session to $81.57 a barrel, down 42 cents, or 0.5%.
Both benchmarks on Wednesday posted their biggest daily percentage declines since early August, with Brent closing at its lowest since Oct. 7 and WTI since Oct. 13, after weekly inventory data from the U.S. Energy Information Administration showed a larger than expected rise in crude stocks last week.
Oil extended losses after Iran and six powers agreed to resume on Nov. 29 talks on reviving the 2015 Iran nuclear deal in Vienna after discussions halted in June. Iran has demanded that the United States remove sanctions that have been limiting its oil exports.
This comes as the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, will meet later on Thursday. The group is expected to reconfirm plans to keep monthly supply increases steady despite calls for an acceleration. News of the resumption of U.S.-Iran nuclear talks “has likely wiped out any last hope that OPEC+ will increase production targets, which may be supportive later in the session”, OANDA’s senior analyst Jeffrey Halley said.
Citi analysts said OPEC+ was likely to stick to its current policy despite pressure from oil importers.
“The majority of OPEC+ members cannot raise production from current levels … while even Saudi Arabia has stressed the need to exercise caution on demand growth given increased COVID instances, while boosting crude oil output,” the bank said in a note.
Also, top producers Saudi Arabia and Russia are more confident higher oil prices will not elicit a fast response from the U.S. shale industry, OPEC+ sources said, reflecting a desire to rebuild revenue and supporting the case against raising OPEC+ output more quickly. However, several major oil companies are planning to increase output or shale spending next year which could undercut OPEC+’s efforts to control supplies and support prices.