Oil prices deepened their losses on Monday after the head of Iran’s diplomacy said his country would deliver its “final proposals” on the nuclear act before midnight local time.
• Also read: Companies benefit from inflation, households pay off
• Also read: Gasoline falls below $4 a gallon in the United States
The possibility of a deal that would allow Iranian production to return to the market despite Chinese demand suffering from a sluggish economy sent prices snorting.
A barrel of Brent from the North Sea for delivery in October was down 4.07% at $94.16 around 11:25 a.m.
The barrel of American West Texas Intermediate (WTI) for delivery in September fell 4.20% to $88.24.
An Iran nuclear deal could end sanctions on this key member of the Organization of the Petroleum Exporting Countries (OPEC).
Minister Hossein Amir-Abdollahian said his country will present its “final proposals” on the nuclear issue on Monday after he said the United States had 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) slows production increases, Iran is a key supply piece,” Rystad analyst Aditya Saraswat told AFP.
“There are still a lot of issues to be considered before the deal is signed,” he warns, but if all parties agree, the country could increase production by a million barrels a day in a matter of months, flooding a market with weak demand.
Two indicators showed on Monday that China’s economy, which eats up a significant chunk of the world’s crude oil output, was ailing.
In July, retail sales and industrial production experienced an unexpected slowdown due to a recovery from COVID-19 and a real estate crisis, which weighed heavily on activity.
The incipient weakness of the Chinese economy “is weighing on oil and there is little chance of a recovery in the short term,” summarizes Bjarne Schieldrop, an analyst at SEB, in a statement.
He believes “clearly that sluggish Chinese demand explains the fall in oil prices since June.”
After soaring earlier in the year as demand picked up as lockdown ended and the Russian invasion of Ukraine began, prices fell more than 20% in two and a half months.