Iran’s possible return to global oil markets is expected to dominate discussions when Opec+ countries meet this week.
The producer group led by Saudi Arabia and Russia will convene its ministerial monitoring committee on Monday while the main session is scheduled for Tuesday.
Opec+ plans to incrementally add 2 million barrels per day by July despite a surge in Covid-19 infections in several markets, particularly India.
Saudi Arabia, which supported the group’s restrictions by volunteering to withdraw 1 million bpd until April, will phase out the cuts by the end of this month.
“Energy markets remain fixated on both the coming Opec+ ministerial meeting and likely revival of the Iran nuclear deal,” said Edward Moya, a senior market analyst for the Americas region at Oanda.
“Opec+ will likely move forward with the June increase of 700,000 bpd but may decide to hold off a July supply increase.”
The alliance may adopt a “more cautious approach” even if the revival in oil demand warrants an increase in July, Oanda said in a note.
The resumption of Iranian output may come sooner than expected. Tehran, which came to the negotiating table with the US to reinstate the nuclear deal, is expected to reach closure before Iran’s presidential elections on June 18.
However, the possible return of Iranian crude to oil markets may complicate the recovery of demand, said Mr Moya.
“Brent could swing by $10 in either direction but energy traders are still optimistic the market will stay balanced,” he said.
Oil rounded off its best week since April on Friday, with international benchmark Brent registering a weekly gain of 3.57 per cent. West Texas Intermediate, which tracks US crude grades, gained 4.3 per cent during the week.
Brent fell 0.69 per cent to settle at $68.72 a barrel on Friday while WTI closed 0.79 per cent lower at $66.32 a barrel.
Iran will look to rapidly bring more output to the market after its exports were curbed by the Trump administration’s “maximum pressure” policy.
Projections by London-based consultancy Facts Global Energy suggest that Iran’s production halved from 3.8 million bpd before sanctions were reimposed in 2018 to below 1.9 million bpd.
Tehran was exempted from Opec+ cuts last year when the alliance introduced some of the steepest production cuts in history, drawing back 9.7 million bpd from markets in response to a significant drop in demand caused by the coronavirus-induced slowdown.
The group has since been gradually phasing out cuts and aims to bring back more supply in line with growing demand.
However, demand may rise over the summer as Covid-19 infection rates decline slightly in big oil consumers such as India, the world's third-biggest oil consumer.
Indian refineries have cut their refinery runs to accommodate lockdown restrictions across several states.
The total number of Covid-19 cases in India are above 27.7 million with the country registering 171,726 new cases and 3,563 deaths on Friday, according to Worldometer, which tracks the pandemic globally.
"[The] embattled Indian and Japanese crude runs are set to recover over summer as infection rates are expected to continue declining and movement restrictions phased out," said consultancy JBC Energy in a note on Friday.
"Consequently, we currently see the global crude balance net short by around 3 million bpd over July-August, making the case for a return of at least part of the Opec+ barrels increasingly convincing."