Oil prices plummet on prospects of a nuclear deal between the US and Iran
15 May 13:00
Oil fell by almost 4% on Thursday after reports of a possible nuclear deal between the US and Iran. This could increase global crude oil supplies, "Komersant Ukrainian" reports citing Reuters.
According to OilPrice.com, as of 12:53 Kyiv time, Brent futures fell by $2.43 (3.68%) to $63.66 per barrel, while WTI is trading at $60.67, down $2.48 or 3.93%.
US President Donald Trump, while on a tour of the Middle East, said that he was very close to reaching a deal with Iran and that Tehran had “to some extent” agreed to its terms. Advisor to Iran’s Supreme Leader Ali Shamkhani said in an interview with NBC that the country would pledge never to produce nuclear weapons and get rid of its stockpiles of highly enriched uranium.
Iran is OPEC’s third largest producer. The country produces about 3 million barrels of oil per day (about 3% of world production), but has been under severe sanctions since 2015, when Trump withdrew from the previous nuclear deal with Tehran.
The drop in oil prices has affected not only Brent. European oil and gas stocks are down nearly 2%, and government bonds from competing producers, from Angola to Nigeria, have also been hit.
Paul Hollingsworth, an economist at BNP Paribas, noted that the drop in oil prices is exacerbating deflationary pressures already felt in regions such as Europe amid concerns about US trade tariffs.
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Situation in related markets
The key questions, according to analysts, remain the following
- will the trade war continue to ease?
- what damage has it caused?
- has this instability caused a structural shift away from US assets and the dollar?
On the foreign exchange market, the dollar fell by 0.7% against the yen to 145.75, while the euro rose by 0.3% to $1.12. According to BNP Paribas, the euro-dollar exchange rate will reach 1.20, reflecting a “structural shift away from dollar assets” that will last for several years.
Meanwhile, stock markets are experiencing a lull after a long period of recovery. The MSCI Asia-Pacific equity index was down 0.15%, and Wall Street futures fell 0.5% after a nearly 30% rise in the Nasdaq since early April.
Investors are awaiting data on retail sales in the US and Walmart’s financial results, which will help assess the state of consumer sentiment. Disappointing figures could increase fears of a recession in the world’s largest economy.
Markets are also focused on the scheduled speech of Federal Reserve Chairman Jerome Powell, who is expected to give hints about the prospects for interest rates in the United States.
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