Oil extended losses below $60/bbl on the prospect of easing tensions between the U.S. and OPEC member Iran, and because the Gulf of Mexico, producers began resuming operations after a storm. Futures fell as much as 3.2% in New York on Tuesday, after Secretary of State Mike Pompeo stated Iran, which has been hit by American sanctions over its weapons program, had signaled an openness to talks. That followed similar comments from the Islamic Republic’s foreign minister, Mohammad Javad Zarif, the first signs of a possible diplomatic solution since the U.S. sought to curb the Middle East producer’s revenues by squeezing its oil exports.
Oil explorers and refiners along the Gulf Coast, meanwhile, are returning staff after the former Hurricane Barry shuttered almost three-quarters of output over the weekend. That’s anticipated to be a factor in the latest tally of American stockpiles, which probably declined by 3 MMbbl last week, based on a Bloomberg survey.
Oil has rallied about 10% since mid-June on shrinking U.S. inventories, rising tensions over Iran and extended cuts by the OPEC (Organization of Petroleum Exporting Countries) and its partners. Geopolitical risk heightened Tuesday because the U.S. stated it was probing the fate of a small Emirati tanker that entered the Persian Gulf state’s waters. Nonetheless, expanding supply, including from American shale fields, and weaker demand, are considerations.
Oil climbed earlier in the day along with U.S. equities after American retail sales, factory output and housing reports all beat forecasts. Nevertheless, the rally fizzled amid speculation the data might deter the Federal Reserve from cutting interest rates.
Royal Dutch Shell Plc and ConocoPhillips are amongst companies seeking to restore output at offshore platforms in the Gulf of Mexico now that climate conditions have improved. The region accounts for 16% of total U.S. crude oil production, based on the Energy Department.