Crude values rise on Iran nuclear deal fallout and price cap on Russian oil

Front-month ICE Brent has increased by $1.37/bbl on the day, to $95.05/bbl at 09.00 GMT.

PHOTO: G7 countries prepare to impose a price cap on Russian crude exports by 5 December. G7 Germany

Upward pressure:

US Secretary of State Anthony Blinken has blamed Iran for stalling the process for negotiating a revived nuclear deal. He now views an agreement as "unlikely" to be reached in the near term because Iran is unwilling to meet a deal proposal put forward by the EU.

US-Iran negotiations have hit a deadlock over Iran’s rigid demand for the UN’s International Atomic Energy Agency (IAEA) to close its probe into Iranian uranium enrichment programmes. The IAEA recently found that Iran’s uranium enrichment has reached up to 60%, and it doubts whether the programme is completely benign.

On the other hand, Iran has questioned Israel’s political intention to derail a deal. It says the EU, US and IAEA are under the influence of the Israeli regime.

G7 countries have proposed a price cap on Russian crude oil exports from 5 December, and a cap on refined products from 5 February next year. They aim to curb Russian energy revenues, which have soared on high prices in recent months. Some market reports suggest that Russia could pitch for more discounted Russian Urals sales to China and India at the upcoming Shanghai Cooperation Organisation summit scheduled this week.

Downward pressure:

US consumer price index (CPI) data for August is scheduled for release today. More evidence of high inflation will likely prompt the US Federal Reserve to tighten its monetary policies further. "The odds for the Fed to keep aggressive rate hikes will be strengthened if US CPI comes out hotter than expected," Reuters reported CMC Markets analyst Tina Teng saying.

Some market participants think the Fed will pursue aggressive rate hikes regardless of whether CPI data shows a slowdown in the US inflation increase.

The Fed will hold a two-day Federal Open Market Committee (FOMC) meeting next week. Economists polled by Reuters expect the Fed to raise its interest rate by another 75 basis points. Interest rate hikes typically push the US dollar up against other global currencies, rendering Brent and other commodities priced in dollars more expensive to some buyers.

By Nithin Chandran

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