Oil prices jumped as much as five per cent on Monday as traders reassessed how quickly Iran could increase exports after a preliminary nuclear deal and anticipated that a months-long rise in U.S. inventories may be slowing.
Brent crude tumbled nearly four per cent on Thursday after Iran and six world powers announced a framework agreement on the OPEC member’s nuclear program. But initial expectations of a quick recovery in oil exports were tempered by views that it could take up to a year to roll back sanctions.
“While clearly a bearish headline, a final deal and full lifting of sanctions still faces a number of obstacles,” Morgan Stanley analysts said in a note.
“Even if a final deal is reached, we do not expect any physical market impact before 2016,” the analysts said.
Oil extended gains after industry intelligence group Genscape reported that stockpiles at Cushing, Oklahoma, barely rose last week, according to traders. It would be the smallest increase in stocks since November at the delivery point for the U.S. crude contract traded on the New York Mercantile Exchange.
Brent May crude LCOc1 rallied $2.62 to $57.57 a barrel at 11:22 a.m. EDT, having reached $57.85 intraday.
U.S. May crude CLc1 was up $2.30 at $51.44 a barrel, just below its $51.61 intraday peak.
Also supportive on Monday, top exporter Saudi Arabia raised the prices for all the crude oil grades it will sell to Asia in May, raising prices a second straight month.
Iran’s foreign minister, Mohammed Javad Zarif, said on Saturday U.N. sanctions would be lifted immediately after a deal, but the United States released a fact sheet on Thursday saying that sanctions would be lifted as Iran demonstrates compliance with any deal.
“Both sides will describe the deal differently,” said Olivier Jakob of Swiss-based consultancy Petromatrix.
Concerns over fighting in Yemen supported prices, as fighting between a Saudi-backed coalition and Shi’ite Houthi forces continued in the port city of Aden.
A weaker dollar following Friday’s disappointing U.S. jobs report for March also buoyed crude oil prices on Monday.