Oil price falls on Monday on account of negative sentiment in the markets

 

Oil price on Monday - Iranian oil output

The price of crude oil suddenly fell on Monday, ending the two-week surge for inexplicable reasons, despite the multitude of positive factors lurking on the horizon.

The growth of all major economies is improving with the sentiment almost at the pre-pandemic level: China, for instance, recorded 25.6% increase in its export during the first quarter; in Europe and the US, vehicular traffic is back on roads; airline industry are active again; the vaccination rollout is going ahead full steam and there is a significant reduction in deaths and hospital admissions.

In India, meanwhile, the normalcy slowly returns with the rate of infections – and deaths – coming down in a moderate way; India is still the world’s third largest importer of crude oil.

Yet, the oil price once again fell defying the expectations. Brent crude broke through the barrier, $ 70 a battel, earlier on Monday, only to fall back below it. Only in 2018, did oil price reach this level.

Of course, the investors are worried about the frequency of the volatility in the markets and some of them, prompted by the anxiety, may have sold their stocks once the WTI hit $70 barrel.

The main factor, however, seems to be the effect of the possible return of Iranian oil into the markets: the signatories to the JCPOA, 2015 Iranian nuclear deal, are meeting in Vienna, the Austrian capital again for the sixth – and final – round of talks in the hope of a breakthrough.

The two parties at the negotiation table are much more optimistic than they were ever before with the teeth-grinding determination to iron out thorny issues.

When I subjected an article in a major publication in the Middle East on the current oil price, to a sentiment analysis, it scored a significant negative value; that means, the crude oil markets are jittery about the arrival of Iranian crude oil in great volumes, despite the guarantee of the process being orderly and transparent.

As the talks on the JCPOA begin in Vienna, the markets must be closely monitoring the developments; Iranian delegation may try to reach an agreement before June, 18 – the day of the Iranian presidential election, when the term of the current administration led by President Hassan Rouhani comes to an end.

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