Oil prices were deepening their losses on Monday following the head of Iranian diplomacy said that his country would send its “final proposals” on the nuclear file before midnight local time.
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The possibility of an agreement that would allow the return to the market of Iranian production, even though Chinese demand is suffering from a sluggish economy, made prices snort.
The barrel of Brent from the North Sea for delivery in October lost 4.07% to 94.16 dollars around 11:25 a.m.
The barrel of American West Texas Intermediate (WTI) for delivery in September yielded 4.20%, to 88.24 dollars.
An Iranian nuclear deal might lead to the end of sanctions for this key member of the Organization of the Petroleum Exporting Countries (OPEC).
According to Minister Hossein Amir-Abdollahian, his country will share its “final proposals” on the nuclear issue on Monday, following he said the United States accepted two of Iran’s demands.
“If our proposals are accepted, we are ready to conclude (the discussions) and announce the agreement at a meeting of foreign ministers,” he added.
“While the Organization of the Petroleum Exporting Countries (OPEC) is slowing its production increases, Iran is a central piece of supply,” Aditya Saraswat, an analyst at Rystad, told AFP.
“There are still a lot of boxes to tick before a deal is signed,” he warns, but if all parties agree, the country might increase production by a million barrels a day in a few months, flooding a market where demand is weak.
Two indicators showed on Monday that the economy of China, which swallows up a significant share of the world’s crude oil production, is in bad shape.
In July, retail sales and industrial production experienced an unexpected slowdown, due to a rebound from COVID-19 and a crisis in real estate which weighed heavily on activity.
The onset of weakness in the Chinese economy “weighs on oil, and there is little chance of a rebound in the short term”, summarizes Bjarne Schieldrop, analyst at SEB, in a note.
He finds it “quite clear that sluggish Chinese demand explains the decline in oil prices since June.”
After soaring at the start of the year as demand picked up with the end of the lockdowns and the start of Russia’s invasion of Ukraine, prices fell more than 20% in two and a half months.
