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Iran deal a wild card for oil market strained by supply risks

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The second Aframax-sized tanker sold to Venezuela is seen off the coast of Bushehr, Iran, on June 8, 2022. Sadra Company/WANA (West Asia News Agency)/Handout via REUTERS

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  • Iran deal would have knee-jerk reaction on oil prices: analyst
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  • Oil will fall if Russia shifts exports to other regions: analyst
  • For a table of crude oil price forecasts, click

Aug 31 (Reuters) – A looming EU embargo on Russian oil is expected to exacerbate supply shortages and keep prices in triple digits this year unless there is a return of Iranian barrels, an oil survey showed on Wednesday. Reuters.

A survey of 41 economists and analysts forecast benchmark Brent crude to average $103.93 a barrel this year, down from the $105.75 forecast in July but above its current trading level of $100.

US crude was seen averaging $99.91 a barrel in 2022, down from the July consensus of $101.28.

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Oil prices have dipped from March highs of nearly $140 on recession fears, but supply concerns remain at the forefront, analysts said.

Fundamentals point to higher prices, with available capacity below 2 million barrels per day (mbpd), oil inventories at multi-year lows, and the European Union poised to sanction Russian oil via shipment in December, said UBS analyst Giovanni Staunovo.

“In addition, ending sales of OECD countries’ strategic oil reserves will remove more than 1 mbpd of supply from November, pointing to tighter markets later in the year.”

Most buyers have been cutting imports of Russian oil products since Moscow’s invasion of Ukraine, with EU sanctions set to tighten later this year and a total ban agreed from February 2023.

“However, if the market realizes that Russia can still shift exports to other regions, oil prices will pull back,” said John Paisie, president of Stratas Advisors.

Russia’s supplies to Asia, as well as some African states, are growing as buyers snap up discount oil that Western countries shun. read more

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Low spare production capacity leaves few options to ramp up production, said Carsten Fritsch, senior commodity analyst at Commerzbank.

Top oil exporter Saudi Arabia said last week that the OPEC+ group of oil-producing nations may need to cut output to balance the market, leaving traders anxious ahead of the group’s meeting on September 5. Read more

“The wild card is the Iran nuclear deal, but it will probably have a knee-jerk reaction in oil prices rather than a sustained one,” said Suvro Sarkar, an analyst at DBS Bank.

Iran has received Washington’s response to a final offer drafted by the EU to salvage Tehran’s 2015 nuclear deal with major powers. read more

If the deal is implemented, analysts expect Iran to add up to 2 million bpd to the market in 6-12 months.

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Reporting from Swati Verma in Bangalore; edited by Noah Browning and Jason Neely

Our standards: The Thomson Reuters Trust Principles.

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