By Ambar Warrick
Investing.com-- Oil prices sank on Thursday, cutting short a recent recovery as traders feared a revived Iran Nuclear Deal and increased output from Russia would flood the market with crude.
West Texas Intermediate futures- the U.S. crude benchmark, fell 0.7% to $87.5 a barrel by 20:07 ET (00:07 GMT). London-traded Brent oil futures rose 0.2% to $93.10 a barrel in early Asian trade.
Losses were driven largely by expectations that a deal between Iran and Western powers was imminent. The revived nuclear deal will see the lifting of some sanctions on Iran, and release over 1 million barrels per day of oil supply into the market.
Additionally, Reuters reported that Russia was likely to see a surplus in oil exports this year. This, coupled with signals of a potential output hike by Saudi Aramco (TADAWUL:2222), the world’s largest oil producer, appear likely to weigh on crude prices for the remainder of the year.
Elevated inflation data in the UK, coupled with a dismal second quarter GDP print from the euro zone also raised concerns over a slowdown in economic activity.
Crude prices had surged to near record levels earlier this year amid supply shocks stemming from the Russia-Ukraine crisis. But they have since consolidated all of those gains as surging inflation and interest rates weighed on economic activity.
Oil prices bounced off six-month lows on Wednesday on a batch of positive data from the United States, which indicated that crude demand was seeing some signs of recovery.
The main catalyst behind the recovery was data from the Energy Information Administration which showed U.S. crude stockpiles fell by 7 million barrels in the week to August 12, far more than expectations for a drop of 275,000 barrels.
This came on the back of record U.S. oil exports, at 5 million barrels per day. U.S. oil production also fell slightly last week, to 12.1 million barrels per day from 12.2 million barrels in the prior week.
A bigger-than-expected drop in gasoline inventories also indicated that U.S. consumers were returning to pumps, after record-high gas prices earlier this year severely crimped demand.
U.S. gasoline futures rose 0.7% to $2.9417 on Thursday, but remained well below 2022 highs.