Wall Street Dials Up Bullish Oil Bets on Iran’s Delayed Return
(Bloomberg) -- Wall Street is turning more bullish on oil prices the longer Iran delays a resumption of nuclear talks.
Strategists and traders from Goldman Sachs Group Inc. to Citigroup Inc. and Vitol Group say the stalling has reduced the chances of millions of Iranian barrels returning to global markets this year. Goldman said this week a deal between Tehran and world powers including the U.S. isn’t likely to happen until April.
Iran’s obfuscation promises to exacerbate the oil market’s tightness over the coming months. Brent crude climbed above $80 a barrel on Tuesday for the first time since 2018 amid supply disruptions in the Gulf of Mexico following Hurricane Ida and as Europe’s natural-gas crisis pushes some businesses to switch to oil.
Read: U.S. and Russia Call For Swift Return to Iran Nuclear Deal
Energy traders had mostly expected an Iranian deal and easing of U.S. sanctions on the Islamic Republic this year. As that becomes less likely, some are calling on OPEC+ to announce faster-than-planned production increases when the cartel meets on Oct. 4.
“The prospect of 1 million daily Iranian barrels expeditiously returning to the market has faded,” said Helima Croft, chief commodities strategist at RBC Capital Markets in New York.
Still No Date
The nuclear negotiations in Vienna, designed to revive an accord from 2015, have been held up since hardline judge Ebrahim Raisi won Iran’s presidential election in June. While Raisi’s government has said it wants a deal and that talks can restart “soon,” officials have yet to set a date for a seventh round.
Tehran’s crude exports have plummeted from around 2 million barrels a day since mid-2018, when then-U.S. leader Donald Trump pulled out of the original agreement. Iranian officials have said they can ramp up production quickly if sanctions are lifted.
Goldman raised its year-end forecast for Brent by $10 a barrel to $90, in part because of the Iranian delay. Citi still expects Tehran to increase crude exports to around 2 million barrels daily, but only by the end of 2022. The negotiations now “look slow and complex,” analysts including Ed Morse said in a report on Monday.
The uncertainty over Iran will probably push up prices even more, according to Doug King, chief investment officer of the Merchant Commodity Fund in London. That’s especially if the northern hemisphere winter is colder than usual, triggering more gas-to-oil substitution, he said.
“The market has a chance to get to $100,” he said.
©2021 Bloomberg L.P.