The reluctance of Biden administration to tap into SPR: a litmus test to gauge the success of the talks on the JCPOA!

 

Fall of crude oil price

The price of crude oil has been falling for three successive weeks and analysts attribute it to a series of factors, ranging from strong dollar to loss of consumer confidence, especially in the major economies.

When the markets closed on Friday, WTI and Brent stood at $80.79 and $82.17 respectively.

Having repeatedly ignored the calls for increased production, the OPEC+ finally admitted this week that the demand for crude oil will shrink while identifying the obvious – the rising energy costs across the world.

The rising new Coronavirus infections, the fear of the emergence of a new variant of the virus, acute labour shortages in the West and global supply chain problems do not help maintaining the momentum of the crude oil markets that saw a remarkable recovery in the two month period from September to October.

In another development, the prospect of the resumption of the talks between Iran and the signatories to the JCPOA, 2015 Iranian nuclear deal, is also weighing somewhat on the price of crude oil as the agreed date, November 29, gets closer, despite the absence of certainty of it being materialised – up until the last minute.

The main stumbling block as far as the future talks, scheduled to be taken place in Vienna, Austria, are concerned is Iran’s insistence on removing the sanctions first and giving a guarantee of it not being abandoned by a future US administration.

Iran’s crumbling economy, diminishing regional influence and the future of fossil fuel, its main source of income, however, may compel Iran to take a more pragmatic approach while exercising flexibility in the talks.

The negotiation teams from the West have an uphill task before them too; the resistance against Iran getting away with its uranium enrichment, using the talks as a smokescreen, by the Arab powerful nations in the Middle East and of course, Israel.

If talks are going to be successful, the impact will be felt across the crude oil markets immediately: it is not just the fact that Iran will increase the supply of the commodity in large volumes that has the potential to causing ripples in the crude oil markets; on the contrary, it is the potential to cause a rift in the OPEC+, if Iran attempts to make up for years of losses of revenue due to US-led sanctions.

These developments will be closely monitored by analysts and investors in the energy sectors in the coming weeks.

The scale of the reluctance of the Biden Administration to tap into the SPR, the Strategic Petroleum Reserve, despite political cost at home, in this context, remains a litmus test to gauge the sense of the success of talks on the JCPOA at the end of this month

 

 

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