Yesterday, a new round of Vienna talks aimed at lifting US sanctions against Iran and re-implementing the Iran nuclear agreement entered its third day. According to Iranian media sources, the talks are still ongoing, and all parties have held talks at various levels, including technical and expert levels, to discuss and exchange views on the remaining issues and differences. Iranian public opinion generally believes that the United States must proceed from a realistic perspective and make a correct political decision as soon as possible so that all parties can sign a final agreement.
According to the website of the Iranian Ministry of Foreign Affairs on August 4, Iranian Deputy Foreign Minister and Chief Negotiator on the Iranian Nuclear Issue Bagheri held talks with representatives of other relevant parties to the Comprehensive Plan of Action on the Iranian Nuclear Issue in Vienna, the capital of Austria, on the same day. This is nearly five months after the suspension of negotiations on resumption of compliance. Relevant parties once again came to Vienna to discuss the issue of resumption of compliance.
Iranian Oil Minister Ogi said that under the current situation, the stability and continuity of the OPEC+ cooperation mechanism will be of great benefit to consumers, and Iran is ready to return to the international crude oil market as soon as possible. He said he hoped that Western countries could correctly understand the current sensitivity in the energy field and adopt a rational and safe attitude. He pointed out that European countries should consider the issue of “winter is coming”.
White House spokesman Kirby said that Iran’s nuclear negotiations have been basically completed and that time seems to be running out for Iran to accept the agreement.
During the negotiation process, the United States and Iran were still fighting fiercely.
The United States this week imposed new sanctions on Iran, targeting companies that ship Iranian oil and petrochemicals to East Asia. Financial blog Zero Hedge believes these sanctions are the latest sign of the Biden administration’s indifference to reviving the Iran nuclear deal.
Iranian Foreign Minister Abdullahiyan said that in response to this action by the United States, Iran has made a corresponding decision and activated hundreds of new centrifuges. He pointed out that the United States should not think that they can gain leverage at the negotiating table on nuclear issues through sanctions. Iran is always serious about negotiations and hopes to reach a strong agreement, but if the United States wants to continue on the path of sanctions, Iran will not stand idly by.
Zheng Mengqi, an energy and chemical researcher at Haizheng Futures, told reporters that in the face of the pressure of the mid-term elections, Biden’s desire to lower oil prices is relatively urgent. With OPEC+ only increasing production by 100,000 barrels per day, the United States may speed up negotiations with Iran, thus making Iranian crude oil returned to the market, further depressing oil prices. If Iranian crude oil returns to the market, the release of short-term floating positions will impact oil prices.
CITIC Futures holds the same view and believes that the focus of US diplomacy may shift from Saudi Arabia to Iran. In the early days, Biden and many U.S. officials have repeatedly expressed confidence in seeing OPEC increase production. However, this week’s decision by OPEC+ to maintain the production plan is a clear violation of U.S. wishes and may push the United States to speed up negotiations on the Iran nuclear agreement. Although OPEC+ maintains the status quo, it still means an established production increase target of at least 2 million barrels per day. If Iran also begins to increase production, it will further increase crude oil supply and suppress oil prices.
This week, U.S. oil fell by 9.74% and Brent oil fell by 8.7%, both recording the largest weekly declines since the week of April 1.
The Biden administration is speculated to be “fabricating data on low gasoline demand to drive down oil prices.”
Adam Button, an analyst at financial website Forexlive, pointed out that the trigger behind the collapse in oil prices was the sudden drop in demand for gasoline. Data shows that U.S. gasoline demand in July has fallen below 2020 levels. But Adam Button wonders whether the petrol demand figures are “fooling the market”.
Some netizens even speculated that the Biden administration was clearly “tampering with data” to lower oil prices.
In late June, the U.S. Energy Information Administration (EIA) stopped publishing reports for several weeks, reportedly due to a server failure. However, since the data was restored, gasoline demand data has been poor. ForexLive believes that “there may be a problem with the report, or it may be a conspiracy.”
Adam Button believes that, first, the EIA data will be significantly revised. The EIA releases oil data every week, but it’s a difficult job and is subject to various assumptions. HFI Reserach noted that there will be significant revisions to the monthly data when they are finally released. Therefore, traders may simply be seeing bad data that needs to be adjusted.
Second, U.S. gasoline reserves remain at their lowest level in five years. Refiners have been working hard this summer amid pressure to boost gasoline production. Combined with an expected drop in demand, inventories should rise quickly. Despite some progress, inventory levels were essentially flat last month and remain at five-year lows.
Third, refiners are seeing no signs of slowing demand. When U.S. refining giant Valero was asked last week about falling demand for gasoline, its chief commercial officer Gary Simmons said: “I can tell you that through our wholesale channel, there is really no sign of any demand decline.”
Fourth, other backup data are inconsistent. Gas Buddy tracks US gas stationsRetail gasoline demand showed a 2% rise last week, while EIA data showed a 7.6% decline. What’s more, data tracked by Gas Buddy shows demand last week was the strongest this year.
Regarding U.S. crude oil data, Zheng Mengqi analyzed that U.S. crude oil inventories have recently rebounded to the low level of the same period in the past five years. Although gasoline inventories are lower than the same period in previous years, they are accumulating slightly. Combined with the high gasoline crack spread falling back to the same period in previous years and the recent gradual decline in refinery operating rates, demand is weakening. The current crude oil price trend is relatively consistent with EIA data. Therefore, market transactions are still closely integrated with EIA data.
“Biden has taken various ways to lower oil prices. After Biden took the initiative to go to the Middle East to ease relations with Saudi Arabia, he still decided to increase production by 100,000 barrels per day at this OPEC+ meeting. In addition, the United States released a large amount of strategic oil reserves, which to a certain extent It has also restrained the increase in oil prices in the peak season. From the monthly difference structure, the sharp rise in recent months and far months is gradually declining, and the contradiction between supply and demand is gradually easing. The U.S. CPI will be announced next Wednesday, and the current inflationary pressure is relatively large. If CPI continues to grow significantly, the job market remains strong, and the possibility of the Federal Reserve expanding interest rate hikes in September will rise. Overall, the center of gravity of crude oil prices will gradually shift downward,” Zheng Mengqi said.
Li Jie, an analyst at CCB Futures, said that after Biden announced that he would visit the Middle East in July, the market was worried that Saudi Arabia might significantly increase production at the request of the United States, and oil prices fell under pressure. Saudi Arabia has strong demands for high oil prices and needs to balance the common interests of OPEC oil-producing allies and Russia. This week, Saudi Arabia significantly raised its August OSP, which also demonstrated its confidence in late-stage crude oil demand. At present, oil prices have fallen by nearly 20% from the June high, and Saudi Arabia will be more cautious in its decision to increase production. After Biden left, Saudi Arabia also made tough statements, and market expectations for production increases significantly weakened, supporting the recovery of oil prices.
“The results of this week’s OPEC+ meeting are basically in line with market expectations. OPEC+ announced the smallest increase in production in history. On the one hand, the reason is that OPEC’s small and medium-sized oil-producing countries have limited production capacity and basically have no room to continue to increase production (Saudi Arabia, the United Arab Emirates, and Iran, which is subject to sanctions, still have More than 1 million barrels of spare production capacity per day); on the other hand, Saudi Arabia has strong demands for oil prices. Since the 2020 ‘price war’, Saudi Arabia has not hesitated to proactively exceed production cuts many times to support oil prices. In addition, in the case of insufficient production capacity, OPEC+ also needs to reserve a margin for potential supply disruptions. From an effect point of view, the 100,000 barrels/day increase in production is still allocated to countries in proportion to the production benchmark, and the actual increase in production is more limited. The supply-side bullishness has basically been released, and demand There are still uncertainties and the oil price center may continue to decline,” Li Jie said.
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