Oil Price Hikes as Iran and the US Smooths Ties

Oil Price Hikes as Iran and the US Smooths Ties

Oil price is looking to wrap the week with gains as geopolitical catalysts provide support.

Top oil producer Iran nears to add 1 million barrels per day into the overall output of OPEC soon.

This assumption comes as the country smoothens former riffraff with the United States on nuclear weapons.

In the latest update, both parties reportedly made a significant advance on negotiations facilitated by the European Union in Vienna, Austria.

According to sources familiar with the matter, a positive deal is now within reach. It is more likely that Iran will be back on track by the second half of the year as the US lifts sanctions.

The former has been on restriction for a long, making it exempted from the supply curb imposed by the Organization of Petroleum Exporting countries.

The member states of the prominent oil association together with allies such as Russia, operate in a restricted environment since April last year.

Along with the positive news, Brent crude for July delivery hiked by 12 cents to $65.23 a barrel. The European benchmark shed off an average of 5% since the start of the week. This is the first fall after two consecutive weeks of gains, as fears of oversupply emerge in the picture.

Iran’s additional production adds a burden amid the volatility of demand on the overall crude market.

Nevertheless, analysts noted that the market is now ready for another round of supply entrance.

The Abu Dhabi National Oil Co estimated in a recent report an increase in demand worth 95 million barrels for last month.


Options Bet for Brent Crude

Meanwhile, traders are taking advantage of the uncertainty in the market to place their options bet on Brent crude.

The average hit target for the European contract with December 2021 expiration came at $100.00 per barrel.

This target is significantly higher than the $80.00 per barrel projection given by Goldman Sachs analysts earlier.

In the next half of the year, spectators noted that there will be an unprecedented boom in orders as more countries facilitate vaccinations.

Such activities are prime drivers of economic stimulation, including the reopening of businesses and other entities.

Experts in the field are convinced that while such a hit price is high, it is not impossible. This comes along with the reopening of borders facilitated by many developed countries worldwide.

Similarly, inflation will always come into play. Commodity prices, led by energy prices, have been the primary drivers of consumer price indices among countries in the past months.