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Oil heads up on Iran and as OPEC fade out glut

James Durbin/Reporter-Telegram

ay 12 awaited to see if U.S. withdraws from Iran nuclear deal. WTI is up 4.6% in April, poised for a second monthly advance

By Heesu Lee

Petroleumworld 04 30

Oil's poised for a second monthly advance, propelled by the prospect of a disruption in Iranian supplies and as OPEC closes in on its target of wiping out a global glut.

Futures were little changed in New York Monday. Crude's heading for a 4.6 percent monthly gain as investors weigh whether U.S. President Donald Trump will pull out of a 2015 nuclear deal between world powers and Iran. A withdrawal would reimpose American sanctions on the producer, curbing its exports. Meanwhile, OPEC continues to trim output even after concluding it's cleared 97 percent of the surplus that's weighed on prices for three years.

Oil has surged to levels last seen in 2014 as everything from the conflict in Syria to tensions between Saudi Arabia and Iran-backed rebels in Yemen stoked concerns over supply disruptions. French President Emmanuel Macron's prediction that the U.S. will pull out of the nuclear deal has boosted speculation over reduced shipments from the Islamic Republic. Still, expanding American drilling activity continues to weigh on prices.

“We'll see oil fluctuating as uncertainties will persist over whether Trump will withdraw from the Iran nuclear agreement,” Vincent Hwang, a commodities analyst at NH Investment & Securities Co., said by phone in Seoul. “Prices have rallied as OPEC and its allies including Russia have eroded global inventories and as geopolitical risks surrounding the U.S. and the Middle East have increased this month.”

West Texas Intermediate crude for June delivery traded at $67.93 a barrel on the New York Mercantile Exchange, down 17 cents, at 11:32 a.m. in Seoul. The contract fell 0.4 percent last week. Total volume traded was about 47 percent below the 100-day average.

Brent crude for June settlement, which expires Monday, dropped 33 cents to $74.31 a barrel on the London-based ICE Futures Europe exchange. Prices are up 5.8 percent for the month. The global benchmark crude traded at a $6.37 premium to June WTI. The more-active July contract traded at $73.64.

Futures for September delivery rose 0.6 percent to 444.2 yuan per barrel on the Shanghai International Energy Exchange, after rising 1.7 last week. The contract is on course for a 5.7 percent gain this month.

While U.S. Defense Secretary Jim Mattis said last week that there's been no decision on the nuclear deal, the nervousness around a potential breakdown in the accord is also spilling over into the physical oil market. Traders are unwilling to sign contracts for Iranian crude and refined products that would be valid after May 12, the deadline for Trump to decide whether to reimpose sanctions, according to recent interviews with six companies that buy and sell oil in the Middle East.

In the U.S., working oil rigs rose by five last week to 825, the highest level since March 2015, according to data from Baker Hughes. The rig fleet has expanded throughout the entire month of April, adding a total 28. Investors are assessing if surging U.S. production, which has topped 10 million barrels a day every week since early February, will undermine efforts by the Organization of Petroleum Exporting Countries to balance the market via output cuts.

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Story by Heesu Lee from Bloomberg. /
04 27 2018

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