Oil prices rise over $ 1 as demand set to absorb new Iranian supply

OIL PRICE - LONDON. Oil prices rose on Monday as a demand bump fuelled by COVID-19 vaccination drives was increasingly seen as sufficient to absorb Iranian oil released back onto the market if Western talks with Tehran lead to the lifting of sanctions.

Brent crude oil futures for July were $ 1.56, or 2.4%, higher at $ 68 a barrel by 1420 GMT, while July U.S. West Texas Intermediate was at $65.19 a barrel, up $1.61, or 2.5%.

Goldman Sachs said the case for higher prices remained intact even with a potential increase in Iranian exports. Its new base case for an October restart still supports an $80 per barrel forecast for this summer, it added.

"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.

Iran and the U.N. nuclear watchdog are extending a recently expired monitoring agreement by a month, both sides said on Monday, avoiding a collapse that could have pitched wider talks on reviving the 2015 Iran nuclear deal into crisis.

Former President Donald Trump withdrew the United States from the deal in 2018 and re-imposed sanctions.

"An aggressive ramp up in Iranian production and exports is unlikely to stall the drawdown in global oil stocks," said Stephen Brennock of oil broker PVM.

"Additional supply from Tehran is poised to be absorbed by the market as a result of a vaccine-spurred surge in demand over the coming months," he added.