The oil market eked out a small gain yesterday, with ICE Brent holding above US$65/bbl. The scheduled call between President Trump and President Putin doesn’t appear to have led to any significant breakthroughs. Trump said that Russia and Ukraine would begin talks on ending the war. However, Putin said the main aim remains to “eliminate the root causes of the crisis”. So, there appears to be little willingness on the Russian side to make any concessions. As such, there was no threat of further sanctions on Russia or a timeline for negotiations. Yet there are concerns that with Trump leaving negotiations to Russia and Ukraine, the US might step back from its role as mediator. Energy markets have been focused on potential peace talks, with an eventual deal possibly leading to an easing of sanctions against Russia.
Iranian nuclear talks appear to be hitting some stumbling blocks. The US has said that any deal with Iran must include a suspension of uranium enrichment, which is a red line. Iran has said that it is “absolutely non-negotiable”. Indirect talks raise prospects for an eventual nuclear deal, which would lead to the lifting of sanctions and increased Iranian oil supply. However, the latest developments demonstrate that reaching a deal won’t be easy.
Chinese data released yesterday shows refiners processed a little under 14.2m b/d of crude oil in April, down 5% month-on-month and 1.3% lower year on year. In addition, apparent oil demand fell to 13.8m b/d last month, down 3.9% MoM and 5.3% lower YoY. It’s the weakest monthly apparent demand number since August. Weaker demand coincides with rising US-China trade tensions following “Liberation Day”.
US natural gas prices came under significant pressure yesterday. Front-month Henry Hub futures settled more than 6.6% lower on the day. This left the market at its lowest level since late April. Strong gas injections into storage and forecasts for cooler weather in the southern regions of the US have weighed on prices.