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Oil pulls back on possibility of increased supply from Iran

Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

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MELBOURNE, Aug 9 (Reuters) – Oil prices fell in early trading on Tuesday following the latest progress in final talks to revive Iran’s 2015 nuclear deal, which would pave the way for an increase in its crude exports in a tight market.

Brent crude futures fell 27 cents, or 0.3%, to $96.38 a barrel at 0027 GMT, a gain of 1.8% from the previous session.

U.S. West Texas Intermediate (WTI) crude futures fell 24 cents, or 0.3%, to $90.52 a barrel, after climbing 2% in the previous session.

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“The specter of a US-Iran nuclear deal continues to loom in the market,” analysts at ANZ Research said in a note.

The European Union on Monday evening presented a “definitive” text to relaunch the 2015 Iranian nuclear agreement, pending approvals from Washington and Tehran. A senior EU official said a final decision on the proposal was expected in “very, very few weeks”. Read more

“While the details regarding the timing of the resumption of oil exports from Iran remain uncertain even if the agreement is revived, it is certainly possible that Iran will increase its oil exports quite quickly,” said Vivek Dhar. , Commonwealth Bank analyst, in a note.

He said Iran could increase its oil exports by 1 to 1.5 million barrels per day, or up to 1.5 percent of global supply, in six months.

“A relaunch of the 2015 nuclear deal will likely cause oil prices to fall sharply given that markets are unlikely to believe a deal will be struck,” Dhar said.

However, signs that demand may not be as weakened as feared are holding a floor below the market for now, following stronger-than-expected Chinese trade data over the weekend and the acceleration surprise in employment growth in the United States in July.

Traders will be watching weekly US oil inventory data, first from the American Petroleum Institute on Tuesday and then from the Energy Information Administration on Wednesday.

Five analysts polled by Reuters expect crude inventories to have fallen by around 400,000 barrels and gasoline inventories to have also fallen by around 400,000 barrels in the week to August 5, while that distillate inventories, which include diesel and jet fuel, remained unchanged. Read more

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Reporting by Sonali Paul Editing by Shri Navaratnam

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