Oil retreated from the highest level since 2014 amid speculation that even if U.S. President Donald Trump delivers on threats to exit a nuclear deal with Iran, the impact for markets may be limited.
New York futures slid as much as 1.5 percent. Trump is set to make a call on today on whether he will pull out of the 2015 accord between Iran and world powers, which eased sanctions on the OPEC nation’s oil trade in return for curbs on its nuclear program.
Oil’s rally to $70 a barrel might have been excessive as America’s European allies may continue to purchase Iranian crude regardless of Trump’s decision, according to Commerzbank AG.
“In my opinion, the current expectations are overdone,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “The impact of the possible sanctions is not to be felt immediately and may be limited,” Weinberg told Bloomberg.
West Texas Intermediate oil for June delivery dropped as much as $1.06 to $69.67 a barrel on the New York Mercantile Exchange and traded at $70.07 as of 12:49 p.m. London time. The contract climbed $1.01 to $70.73 on Monday, the highest closing price in more than three years. Total volume traded Tuesday was about 10 percent above the 100-day average.
Brent for July settlement fell 64 cents to $75.53 a barrel on the London-based ICE Futures Europe exchange. Prices on Monday climbed 1.7 percent to $76.17. The global benchmark crude traded at a $5.54 premium to July WTI.
The potential fallout in the oil market of the US decision on Iran, is unclear. While consultant FGE is among industry watchers that have said renewed U.S. measures may cut production from OPEC’s third-largest member, Barclays Plc sees Iran’s output little changed in 2018.
How European and Asian oil buyers react to possible American action, plus the effect on OPEC’s output curbs, will also be watched, Bloomberg added in the report.