Oil prices firm on summer demand as Iran talks drag

Oil prices edged higher on Monday, underpinned by strong demand during the northern hemisphere summer driving season and a pause in talks to revive the Iran nuclear deal that could lead to a resumption of crude supplies from the OPEC producer.

Brent crude for August gained 14 cents, or 0.2 per cent, to $73.65 a barrel by 1109 GMT. US West Texas Intermediate (WTI) crude for July was up 21 cents, or 0.3 per cent, at $71.85 a barrel.

Both benchmarks have risen for the past four weeks on optimism over the pace of global Covid-19 vaccinations and expected pick-up in summer travel. The rebound has pushed up spot premiums for crude in Asia and Europe to multi-month highs.

"Oil's underlying physical demand picture remains positive," said OANDA analyst Jeffrey Halley. "Despite the noise in financial markets, the real world is on the right track and will require increasing amounts of energy as it reopens." Bank of America said on Monday that Brent oil was likely to average $68 this year but could hit $100 next year on unleashed pent-up demand and more private car usage as public transport use lags and remote workers run more errands near their homes.

Negotiations to revive the Iran nuclear deal took a pause on Sunday after hardline judge Ebrahim Raisi won the country's presidential election. Two diplomats said they expected a break of about 10 days.

Iranian and Western officials say Raisi's rise is unlikely to alter Iran's negotiating position.

A deal could lead to Iran exporting an extra 1 million barrels per day, or 1 per cent of global supply, for more than six months from its storage facilities.

Oil prices are also drawing support from forecasts of limited growth in US oil output, giving the Organization of the Petroleum Exporting Countries (OPEC) more power to manage the market in the short term before a potentially strong rise in shale oil output in 2022.

However, the US rig count, an early indicator of future oil output, rose by eight last week to 373, its highest since April 2020, data from energy services firm Baker Hughes Co showed.