Iran cut ties with UN nuclear inspectors, triggering a 2% surge in oil prices

Oil prices rose 2% on Tuesday after Iran ended all cooperation with UN atomic inspectors, sending an immediate signal through global markets.

The decision came just days before a scheduled OPEC+ meeting, and traders responded by pushing Brent crude past $67 per barrel, while West Texas Intermediate (WTI) climbed near $66. The jump followed a prior dip caused by a ceasefire between Israel and Iran, but the calm didn’t last.

According to Bloomberg, this sudden rise in oil prices is now being driven by a mix of geopolitical tension, falling US stockpiles, upcoming economic data, and production decisions expected this weekend.

The American Petroleum Institute said oil stockpiles at the Cushing storage hub dropped by 1.4 million barrels last week. If confirmed by official US government data, that would be the biggest drop since January and leave inventories at their lowest seasonal level since 2005.

Cushing is the main pricing hub for WTI, and a drop that sharp makes it clear that supplies are tighter than expected. This all adds more weight to an already tense market heading into the weekend, when OPEC+, including Russia, will decide whether to raise production again.

OPEC+ prepares to increase output as volatility returns

After the ceasefire agreement between Iran and Israel sent oil crashing last week, volatility has now returned to where it was before that conflict started. The market’s attention is locked on the upcoming virtual OPEC+ meeting on Sunday, where another output hike is widely expected.

According to Goldman Sachs analysts, including Yulia Zhestkova Grigsby, the market has already priced in the increase. In a note, Yulia wrote, “We do not expect a large market reaction if OPEC+ decides to increase production on Sunday as consensus has already shifted towards this outcome.”

Priyanka Sachdeva, senior market analyst at Phillip Nova, said the price movement is being pulled in several directions. “Today’s oil price moves are being pushed by the interplay of potentially rising OPEC+ supply, confusing US inventory signals, uncertain geopolitical outlook, and macro-policy ambiguity.”

Priyanka also pointed out that investors are no longer likely to be surprised by planned production increases, since expectations for another quota hike were already built in.

The planned increase is expected to be around 411,000 barrels per day for the next month. That’s the same volume OPEC+ agreed to raise in May, June, and July. Saudi Arabia, the biggest oil exporter globally, already ramped up exports by 450,000 barrels per day in June compared to May, according to data from Kpler.

That’s the highest Saudi exports have been in over a year, showing that the group’s previous commitments are already flowing through the system.

Economic signals muddy oil’s outlook as traders wait on jobs data

Aside from supply and geopolitical drama, economic signals are also weighing on oil traders this week. The most important is the upcoming non-farm payrolls report due Thursday.

Tony Sycamore, an analyst at IG, said that the US job numbers will influence how soon and how deeply the Federal Reserve might cut interest rates. Lower rates could boost economic activity, and that would likely raise oil demand as businesses spend more and consumers use more fuel.

Another key factor is the US dollar, which has just fallen to a three-and-a-half-year low against major global currencies. A weaker dollar tends to make oil cheaper for buyers using euros, yen, or yuan, so that could also increase demand. Priyanka said that while global economic concerns remain, the falling dollar is one of the few factors that could support oil in the short term.

With geopolitical risk on pause and investors already anticipating another production increase, some analysts expect oil futures to stay within a tighter range this week, unless there’s a surprise in Thursday’s payroll data or a change in OPEC+ decisions.

But traders aren’t letting their guard down. The combination of falling inventories at Cushing, unstable US macro indicators, and Iran’s sudden break with the UN has created too many unknowns to ignore.

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now