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Oil edges toward $70 as traders brace for Trump's Iran decision
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Participants gather in the lobby ahead of an informal meeting between members of the Organization of Petroleum Exporting Countries, OPEC, in the Algerian capital Algiers, on Sept. 28, 2016. (AFP/File photo)
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il in New York was on the verge of passing $70 a barrel for the first time since November 2014 as traders braced for a re-imposition of US sanctions on Middle East crude producer Iran.
Futures added as much as 0.3 percent to $69.91 a barrel after gaining 1.9 percent on Friday. While U.S. President Donald Trump hasn’t announced if he’ll pull out of a deal between Iran and world powers as a May 12 deadline nears, officials are positioning for negotiations. The 2015 accord eased sanctions on OPEC’s third-largest member in exchange for curbs on its nuclear program, and renewed American measures may stifle its crude exports.
Iran has come out against higher prices, after a rally of about 16 percent this year on output cuts by the Organization of Petroleum Exporting Countries and allies and rising geopolitical risks in the Middle East. Crude at $60 to $65 a barrel is “suitable,” an official from the OPEC producer said on Sunday, signaling a split with fellow group member Saudi Arabia that’s said to be aiming for $80 oil. The cartel will meet next month in Vienna.
“Fresh sanctions, which would remove some of Iran’s crude supplies from the global market, will tighten the balance between demand and supply and support crude prices,” Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone from Tokyo. “While there could be profit-taking given current oil prices, it will be limited as concerns over Iran are rising.”
West Texas Intermediate oil for June delivery edged up 6 cents to $69.78 a barrel on the New York Mercantile Exchange at 9:01 a.m. in Singapore. It reached within 3 cents of the $70 mark on Friday. Total volume traded was about 48 percent below the 100-day average. Prices rose 2.4 percent last week.
Brent for July settlement nudged up 2 cents to $74.89 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $5.30 premium to July WTI.
While refusing to reveal what he’ll do by May 12, Trump repeated his belief the existing accord is “a horrible agreement for the United States.” But, he added, “That doesn’t mean I wouldn’t negotiate a new agreement.” Still, Iran is ruling out new talks, calling the current agreement “non-negotiable.” Meanwhile, America’s European allies continue to back it, saying the deal has been essential to reining in Iran’s nuclear program.
The constant fluctuation in oil prices is destabilizing for future investment and security of supply, Iranian Oil Minister Bijan Namdar Zanganeh said. While he made no mention of the multiparty nuclear accord that eased sanctions on Iran starting in January 2016, he warned that the insertion of politics into the energy market will hurt producers and consumers alike.
The Persian Gulf country’s regional arch-rival Saudi Arabia is said to want crude closer to $80 a barrel, in part to support a stake sale in its state energy giant. The OPEC nations continue to clash in proxy conflicts from Syria to Yemen.
