Oil prices saw minimal movement on Tuesday as traders evaluated the implications for supply stemming from a potential breakdown in U.S.-Iran negotiations regarding Tehran’s nuclear program, strong front-month physical demand in Asia, and a cautious outlook for China’s macroeconomy. Brent futures slipped 6 cents to $65.48 a barrel by 03:05 GMT (currently trading at $65.41), while U.S. West Texas Intermediate crude futures climbed 1 cent to $62.70 (currently trading at $62.15).
Discussions on Iran’s nuclear program would “lead nowhere” if Washington insisted that Tehran slash uranium enrichment activity entirely, state media quoted Deputy Foreign Minister Majid Takhtravanchi as saying on Monday.
These comments followed U.S. special envoy Steve Witkoff’s assertion on Sunday that Washington would require any new deal to incorporate a pact to refrain from enrichment, a precursor to the development of nuclear bombs. A deal would have paved the way for easing U.S. sanctions and permitted Iran to increase oil exports by 300,000 barrels to 400,000 barrels per day, according to StoneX analyst Alex Hodes.
Prices were also driven by expectations of robust near-term physical demand, supported by healthy refining margins in Asia. “The Asian buying cycle got off to a very mild start, but strong margins and the end of maintenance should still prove supportive,” Reuters reported, citing Sparta Commodities’ analyst Neil Crosby.
Read more: Crude oil prices hold steady at $65.36 amid trade tensions, economic data from China
China’s sluggish growth pressures oil prices
Singapore complex refining margins, a regional bellwether, averaged more than $6 a barrel for May, LSEG data indicated, up from April’s average of $4.40 a barrel. However, a U.S. sovereign downgrade by Moody’s dampened the economic outlook for the world’s largest energy consumer, putting downward pressure on oil prices.
The ratings agency downgraded the U.S. sovereign credit rating by one notch on Friday, citing concerns about its escalating debt of $36 trillion. Further pressure on oil prices came from data showing decelerating industrial output growth and retail sales in China, the world’s top oil importer, with analysts anticipating a decline in fuel demand.
In a client note, BMI analysts projected a decrease of 0.3 percent in 2025 consumption, impacted by a slowdown across various oil product categories. “Even if China adopts stimulus measures, it may take time to have a positive impact on oil demand,” they added.
