By Peter Nurse
Investing.com -- Crude oil prices strengthened Monday, helped by doubts over Iranian crude reentering the market as well as the continued reopening of U.S. and European economies from the Covid-19 pandemic.
By 9:20 AM ET (1420 GMT), U.S. crude futures traded 1.7% higher at $64.63 a barrel, while the international benchmark Brent contract rose 1.6% to $67.38.
U.S. Gasoline RBOB Futures were up 1.2% at $2.0960 a gallon.
Oil prices fell sharply last week, with Brent suffering its largest weekly drop since March, after Iran's President Hassan Rouhani indicated that the United States was ready to lift sanctions on his country's oil sector, potentially allowing up to 1 million barrels a day of crude to reenter the global market.
However, doubts emerged about this additional supply after the speaker of Iran's parliament said on Sunday a three-month monitoring deal between Iran and the U.N. nuclear watchdog had expired, and thus the watchdog could no longer access images from inside some Iranian nuclear sites.
Iran quickly announced a one-month extension Monday, and this will help the mood in the wider, indirect talks between Washington and Tehran on reviving the 2015 Iran nuclear deal. But there still remains a lack of trust between the two sides, and the lifting on Iranian sanctions is by no means a certainty.
Yet, even if Iran is able to add to global supply, Goldman Sachs (NYSE:GS) still feels confident about the oil market.
"Even aggressively assuming a restart in July, we estimate that Brent prices would still reach $80 per barrel in fourth quarter 2021," the bank said in a note.
This is based on the U.S. and European economies recovering from the Covid pandemic and reopening as their vaccination programs quickly make their populations safe.
New York City's school system, the largest in the country, will require all of its 1.1 million students to attend classes in person in the fall, after more than a year of disruption, while in Europe death rates continue to fall in France and Italy, further improving the fuel demand outlook.
That said, the latest positioning data shows that speculators reduced their net long positions in both the ICE (NYSE:ICE) Brent and Nymex WTI contracts, with the net long in WTI the smallest since January.
“The growing possibility of an increase in Iranian supply, along with an increase in Covid-19 cases in parts of Asia has been enough to get some speculators nervous,” said analysts at ING, in a note.