Oil futures rose on Wednesday after Iran announced it will suspend cooperation with the International Atomic Energy Agency (IAEA), while investors assess expectations of increased supply from major producers next month amid continued weakness in the US dollar.
Brent crude rose 60 cents, or 0.9%, to $67.71 a barrel as of 10:17 GMT, while US West Texas Intermediate rose 55 cents, or 0.8%, to $66 a barrel.
Brent traded between a high of $69.05 a barrel and a low of $66.34 since June 25, as concerns eased over supply disruptions in the oil-producing Middle East following the ceasefire agreement between Iran and Israel.
On Wednesday, an Iranian law came into effect requiring that any future inspections of its nuclear sites by the IAEA must obtain approval from the “Supreme National Security Council” in Tehran. Iran accused the agency of bias toward Western countries and of providing justification for the airstrikes carried out by Israel.
Giovanni Staunovo, commodities analyst at UBS, said: “The market is pricing in some geopolitical risk premium as a result of Iran’s move against the IAEA.” He added: “But this is about sentiment and fears—there are no actual disruptions in oil supplies so far.”
Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that the planned increases in supply by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia—collectively known as OPEC+—already appear to be priced in by investors and are unlikely to surprise markets at this point.
Four OPEC+ sources told Reuters last week that the group plans to increase production by 411,000 barrels per day in August, a figure similar to the hikes agreed upon for May, June, and July.
Staunovo said: “Everyone is talking about additional supplies coming to the market, but in reality those barrels haven’t arrived yet,” pointing out that “this may be due to those volumes being consumed domestically within the producing countries.”
Data from Kpler showed that Saudi Arabia, the de facto leader of OPEC+, increased its oil exports in June by 450,000 barrels per day compared to May, marking the highest pace in over a year. However, Staunovo added that total OPEC+ exports have remained stable or slightly declined since March, and he expects this trend to continue over the summer as energy consumption rises due to high temperatures.
Meanwhile, the US dollar continued its decline, reaching its lowest level against major currencies in three and a half years early on Wednesday. A weak dollar is considered supportive for oil prices as it boosts the appeal of crude for buyers using other currencies.
Tony Sycamore, market analyst at IG, said upcoming US non-farm payrolls data due Thursday will play a key role in shaping investor expectations around the timing and depth of Federal Reserve interest rate cuts in the second half of this year.
He added that interest rate cuts would stimulate economic activity, which could in turn increase demand for oil.
The US Energy Information Administration is expected to release its official data on US crude inventories on Wednesday at 10:30 a.m. Eastern Time.
Data released late Tuesday by the American Petroleum Institute showed US crude inventories rose by 680,000 barrels last week, a period that typically sees stockpile declines due to peak summer demand, according to informed sources.
