SD: Oil Heads for Third Quarterly Drop as Iran Deal Deadline Looms
(Bloomberg) -- Oil headed for a third quarterly loss as Iranian and Western diplomats worked toward a nuclear deal that may lead to the OPEC member increasing crude exports.
Futures dropped as much as 2.9 percent in New York, falling for a third day. Iran and world powers are working on a joint text that would lift sanctions against the fifth-largest oil producer in the Organization of Petroleum Exporting Countries, Irannuc.ir, a website associated with Iranian hardline groups, reported Tuesday, the deadline for talks between the two sides.
Oil in New York is sliding toward the longest run of quarterly declines since 2003 amid speculation the global surplus that cut prices by almost 50 percent last year will persist. Iran may be hoarding 7 million to as much as 35 million barrels, shipbrokers and government officials estimated, which Barclays Plc and Societe Generale SA predict would be sold abroad first should a nuclear pact be reached.
“The Iran situation is negative for oil as any agreement will push it lower,” Michael Hewson, London-based senior analyst at CMC Markets Plc, said by phone. “You have all this Iranian oil waiting to come back onto the market. It’s in everyone’s interests to find a deal and bring Iran back into the fold.”
West Texas Intermediate for May delivery fell as much as $1.40 to $47.28 a barrel in electronic trading on the New York Mercantile Exchange and was at $47.43 at 11 a.m. London time. The contract lost 19 cents to $48.68 on Monday. The volume of all futures traded was about 34 percent below the 100-day average for the time of day. Prices are down about 11 percent this year.
Iran Supplies
Brent for May settlement slid as much as $1.49, or 2.6 percent, to $54.80 a barrel on the London-based ICE Futures Europe exchange. It lost 12 cents to $56.29 a barrel on Monday. Prices are about 4 percent lower this quarter. The European benchmark crude traded at a premium of $7.58 to WTI.
Iran and world powers agreed to draft a new Chapter VII UN Security Council resolution, which will list the obligations of both sides, , Irannuc.ir said citing people familiar with the talks. The U.S. and France want a snapback mechanism that automatically reimposes sanctions should Iran violate the deal, the Iranian website reported.
‘Tricky Issues’
U.S. Secretary of State John Kerry said Monday, before the website’s report, that some “tricky issues” remain to be resolved if diplomats are to meet their timetable and reach an outline agreement on Iran’s nuclear program. Negotiators remain divided over the pace of easing sanctions and the research limits imposed on the Persian Gulf nation to ensure it can’t obtain nuclear weapons.
Iran could raise crude exports by 1 million barrels a day if sanctions were lifted, Oil Minister Bijan Namdar Zanganeh said March 16.
“If there’s an agreement, that could release a fair bit of oil into the market,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. “The price has been reasonably resilient given all the downside potential.”
U.S. crude stockpiles probably expanded further from a record last week, a Bloomberg survey showed before government data Wednesday.
In the U.S., crude inventories probably rose by 4.5 million barrels through March 27, according to the median forecast in the Bloomberg survey of six analysts before Wednesday’s Energy Information Administration report. Stockpiles have climbed the prior 11 weeks to 466.7 million, the highest level in weekly records from the Energy Department’s statistical arm dating back to August 1982.
