The recent run-up in oil and gasoline prices may have run its course - for now.
Thanks to easing demand from a slowing global economy and increased production from Saudi Arabia, the oil market is coming off a two-year cycle of tightening supply, according to the International Energy Agency. That's helped snap a 13% surge in oil prices since the start of the year.
Much of that run-up was fueled by fears of a cutoff in supplies from Iran, which is the target of U.S. and European sanctions aimed at curbing its nuclear weapons program. Those sanctions have been applied in stages since the start of the year.
But traders may have overreacted to the potential impact of those sanctions, according to Julian Jessop, chief global economist at Capital Economics.
"We expect any remaining Iran premium in prices to evaporate soon," he said. "Even if sanctions continue to tighten there is ample evidence that the countries most affected have already been able to find alternative supplies, while Iran is actually having to cut prices in order to sell its oil elsewhere."
There is also a good chance Iran will make the concessions needed to end the standoff, said Jessop.
In the meantime, Saudi Arabian oil officials are striving to make up any supply shortfall. On Friday, oil minister Ali al-Naimi said the kingdom is working with other OPEC members to boost output and keep prices from rising.
"We are seeing a prolonged period of high oil prices," Naimi said in a statement during a visit to Seoul. "We are not happy about it. (Saudi Arabia) is determined to see a lower price and is working towards that goal."
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