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Oil market worried by supply overhang

Crude futures yesterday reverted to a sharp downward correction that has turned around today. By the time of writing, Brent was up 0.94% at $87.08/bbl, while WTI was trading 0.82% higher at $83.99/bbl.

Conflicting reports have come in regarding the nuclear talks between Iran and the US as the latter claims that no concessions will be made, whereas Iran is hopeful that a nuclear deal can be worked out alongside the possible lifting of the oil sanctions. Yemeni Houthi attacks on the UAE are already priced in, while reports that Texas-based oil producers are boosting demand for drilling equipment have reignited concerns about a future supply overhang.

On Tuesday morning, Brent has been trading near the $87/bbl support level, from which short-term declines are possible, although this level generally appears to be quite strong. In the short term, price action could correct to $86/bbl.

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