As Iran’s nuclear negotiations resurfaced, oil prices plummeted, and US crude oil inventories rose by

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(Settlement price update)

Barani Krishnan the possibility of Iran’s nuclear negotiations with Western powers regained headlines, crude oil prices fell 2% on Wednesday as Tehran tried to get rid of US sanctions that banned the sale of its oil to the world.

The weekly increase in US crude oil inventories also put pressure on the market, as the US Energy Information Administration (EIA) reported inventory levels that were twice the market’s expectations. Refineries increased crude oil imports last week to produce more products such as gasoline and diesel, while crude oil exporters’ shipments decreased.

The benchmark US crude oil price fell by 1.99 US dollars, or 2.4%, to 82.66 US dollars per barrel. This is the biggest one-day drop in WTI crude oil in three weeks. It hit a seven-year high of US$85.41 on Monday.

Crude oil traded in London, the global oil benchmark, closed down US$1.82, or 2.1%, to US$84.58. Brent crude oil hit a three-year high of $86.70 on Monday.

Iran’s top nuclear negotiator said on Wednesday that negotiations between Tehran and six world powers aimed at resuming its 2015 nuclear agreement will resume at the end of November, and crude oil prices have fallen. The last time the two sides met was in June.

At the same time, EIA’s weekly oil status report shows that US crude oil inventories increased by 4.27 million barrels in the week ending October 22, after falling by 431,000 barrels in the previous week.

Analysts tracked by had previously expected an increase of about 2 million barrels this week, making the EIA report almost twice the expected data. Three weeks ago, crude oil inventories continued to increase, with a total increase of approximately 13 million barrels.

However, in the context of the larger oil market, these are all fleeting factors that have not lasted long enough to bring a meaningful correction to crude oil prices.

For example, Ebrahim Raisi, the president of Iran’s hardline regime, continues to subvert Western efforts to control Iran’s nuclear program.

Although US crude oil inventories may have increased in the past week, inventories at the Cushing Storage Center in Oklahoma — sometimes a more important indicator for the market — have fallen to a three-year low. Gasoline inventories also fell again this week.

“The nearly 4.3 million barrels of crude oil production in the last week may seem large, but from the larger plan, it’s nothing, because the US crude oil supply situation is still far below the weekly demand for petroleum products such as gasoline and diesel.” Said John Kilduff, founding partner of New York energy hedge fund Again Capital.

EIA data shows that crude oil imports increase by 430,000 barrels per day, or 3 million barrels per week, while exports decrease by 273,000 barrels per day, or 1.9 million barrels per week.

On the other hand, gasoline inventories decreased by nearly 2 million barrels last week, and increased by 5.37 million barrels the previous week. Distillate stocks, including diesel, fell by 432,000 barrels after a decrease of 3.9 million barrels in the previous week.

In Cushing, nearly 4 million barrels of crude oil disappeared last week. As long as Cushing does not have enough weekly refills, any hope of balancing crude oil supply with product demand will be futile.

From a perspective, in the past 10 weeks, the 1-2% daily correction of WTI or Brent crude oil is usually overturned by the 4-5% surge this weekend.

Although the current oil market statement is absolutely bullish, long-traders usually amplify the smallest positive developments, disproportionately hitting the rebound.

Of course, the mission of OPEC+, an oil-producing country, is to ensure that global crude oil production remains at about one-fifth of current demand, which helps the oil narrative. In any ordinary market, this will be regarded as deliberately stifling natural production to create an imbalanced market. But in OPEC’s terminology, it is called “rebalancing.”

(Additional reporting by Sam Boughedda)

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