INV: Oil price extends drop as Iranian talks near deadline
Crude oil futures have declined so far in European morning trading today, extending the sharp drop from the previous session. Markets are focusing on talks between Iranian and Western diplomats, with officials working towards a nuclear deal that may lead to the lifting of sanctions on the Persian Gulf nation and further exacerbate the global supply glut.
Brent for May delivery had declined 0.89 percent, or 50 cents, to $55.91 per barrel as of 08:03 BST on the London-based ICE Futures Europe exchange. The contract shed close to five percent of its value during the previous session, erasing its sharp gains from Thursday. Market volatility rose after Saudi Arabia and its allies bombed rebel targets in Yemen. The news gave rise to worries over potential supply disruptions but those fears were quickly dismissed by analysts.
“The market is beginning to think the situation is fairly contained and unlikely to go beyond the borders of Yemen,” Ric Spooner, a chief strategist at CMC Markets in Sydney, was quoted by Bloomberg as saying. “In any event, there’s an unusually large surplus buffer in place.”
Meanwhile, May WTI futures were down 82 cents, or 1.68 percent, at $48.05 a barrel in electronic trading on the NYMEX in New York as of 08:03 BST. The US benchmark fell $2.85 on Friday to record its biggest daily drop since 26 February as the market began to price in the possibility of a deal with Iran ahead of tomorrow’s deadline. Reuters cited ANZ analysts as saying: "Any relaxation of Iran oil sanctions could see increased exports adding to swelling global supplies and further pressuring prices”.
Meanwhile in the US, the number of active oil and natural-gas drilling rigs continued to fall as producers adjust to lower prices, although analysts claim that lower drilling activity would only affect actual oil production later this year. The weekly US rig-count data from oil-field-services firm Baker Hughes Inc., released on Friday, showed that the number oil and natural gas rigs deployed in the US had declined by 27 last week to 1048. The rig count has contracted for 16 consecutive weeks.
Based on the two front month contracts, Brent was trading at a premium of $7.86 to WTI as of 08:03 BST. The premium has contracted from the one-year high of $13 per barrel touched earlier in March.
