BLBG:Oil Drops a Second Day as Iran Offers Uranium-Enrichment Deal
Oil fell for a second day in New York after Iran reiterated an offer to suspend domestic production of medium-enriched uranium before European officials meet to discuss tighter sanctions on the Persian Gulf country.
Futures slid as much as 1.1 percent to the lowest level in almost a week. Iran is ready to enter talks about its nuclear program in exchange for guaranteed supplies of 20 percent- enriched uranium for its Tehran Research Reactor, said Ramin Mehmanparast, a Foreign Ministry spokesman, according to a Press TV report yesterday. The European Union has reached a preliminary agreement to intensify sanctions to increase pressure on OPEC’s third-largest oil exporter to curb its nuclear program, EU diplomats with knowledge of the matter said.
“If the news coming out from Iran indicating that it’s willing to suspend 20 percent enrichment for reactor fuel is true and they reach an agreement, then we might see a push to the downside” for oil, Nabil Farhat, a partner at Al Fajer Securities, an Abu Dhabi-based broker, said yesterday.
Crude for November delivery fell as much as $1.04 to $90.82 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.07 at 2:30 p.m. Singapore time. The contract declined 0.2 percent on Oct. 12 to $91.86. Prices are down 7.9 percent this year.
Brent oil for November settlement on the London-based ICE Futures Europe exchange lost as much as 77 cents, or 0.7 percent, to $113.85 a barrel. The contract expires tomorrow. The more actively traded December future was down 55 cents at $113.06. The European benchmark was at a $22.99 premium to New York-traded West Texas Intermediate grade, up from $22.76 on Oct. 12.
Brent-WTI Spread
The spread between Brent and WTI may be at a seasonal peak, according to Morgan Stanley. The gap may narrow as U.S. Gulf Coast refiners resume operations after maintenance, boosting demand for domestic crude, and as North Sea supplies rise after work finished on the oil fields that produce the grades underlying the Brent contract, Hussein Allidina, the head of commodities research at Morgan Stanley, said in a report dated today. The price difference reached $23.64 on Oct. 11, the most since October 2011.
Officials from the EU’s 27 nations agreed in Brussels on Oct. 12 to close loopholes in sanctions aimed at curbing the Iranian government’s ability to raise funds for its atomic program, which the U.S. and its allies say may be aimed at producing weapons, the officials said, asking not to be identified because the talks were private.
Iran Exports
The proposed sanctions must now be approved by the bloc’s foreign ministers, who meet today in Luxembourg. The agreement follows international talks in recent months that have yielded little progress. Iran denies that it’s developing nuclear weapons and says its program serves civilian needs.
Oil exports from Iran will probably remain at lower-than- normal levels for the next few years because of the sanctions, Antoine Halff, the head of the International Energy Agency’s oil industry and markets division, said on a conference call with reporters on Oct. 12. The country’s crude exports decreased to 860,000 barrels a day in September, from 1.1 million a day in August, data from the Paris-based agency showed.
Shipments have been “stable” in recent months, said Mohammad Ali Khatibi, Iran’s governor to the Organization of Petroleum Exporting Countries, according to the Tehran-based Donya-e-Eqtesad newspaper yesterday. He denied that overseas sales dropped last month.
Demand Outlook
The IEA also reduced its forecast for global oil consumption in its monthly report on Oct. 12, citing slower economic growth. The agency predicted world oil use of 89.7 million barrels a day this year and 90.5 million in 2013, down by 100,000 barrels a day each from the August outlook.
“The report that Iran may be prepared to suspend their uranium plans may be a bit of a background factor but we’re probably some time away from things coming to a head” in the Middle East, said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The main game is the demand-supply balance. The risk to oil prices is to the downside.”
Crude imports by China, the world’s second-biggest oil consumer, slid 1.8 percent in September from a year earlier to 20.08 million metric tons, according to data from the Beijing- based General Administration of Customs on Oct. 13. Purchases were up 9.1 percent from August, its website showed.
Money managers cut net-long positions in West Texas Intermediate oil by 5,168 futures and options combined, or 3.1 percent, to 161,004 in the week ended Oct. 9, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report on Oct. 12.
Oil in New York has long-term technical support at $89.83 a barrel, data compiled by Bloomberg showed. On the weekly chart, that’s the 50 percent Fibonacci retracement of the decline to $32.40 in December 2008 from an intraday record high of $147.27 in July that year. Buy orders tend to be clustered near chart- support levels.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ayesha Daya in Dubai at adaya1@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
