Bloomberg News

Oil Declines for a Second Day After Iran Nuclear Talks

April 16, 2012

Oil fell a second day after the first international talks in 15 months on Iran’s nuclear program yielded an agreement to reconvene in May.

Futures declined as much as 0.9 percent in New York after sliding 0.5 percent last week. United Nations Security Council members including the U.S., U.K., China, France and Russia plus Germany will meet Iranian delegates in Baghdad on May 23 following “constructive” talks in Istanbul on April 14, the European Union’s foreign policy chief said yesterday. Oil has advanced this year on concern that tension with Iran will disrupt global supplies.

“The flavor of those talks did seem a little more positive than the rhetoric of the past,” said David Lennox, an analyst at Fat Prophets in Sydney. “Between $90 and $100 a barrel would appear to be a fair value” for West Texas Intermediate prices without the Iran premium, he said.

Crude for May delivery slipped as much as 97 cents to $101.86 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.97 at 3:17 p.m. Singapore time. The contract fell 0.8 percent to $102.83 on April 13, the lowest close since April 11. Prices are up 3.2 percent this year.

Brent oil for June settlement dropped $1.39, or 1.2 percent, to $119.82 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s front-month premium to New York-traded West Texas Intermediate was at $17.34, compared with $19 on April 13.

Iran Talks

The talks in Istanbul lasted 10 hours and were also described as constructive by the Iran’s lead negotiator, Saeed Jalili. The Islamic Republic dropped upfront demands, and the discussions focused almost exclusively on the nation’s nuclear program, according to two Western diplomats involved. Israel’s Prime Minister Benjamin Netanyahu criticized the outcome as giving Iran more time to continue enriching uranium, the process capable of producing fuel for a nuclear bomb.

Oil also came under pressure as the Bank of Korea lowered its 2012 growth and inflation forecasts. Asia’s fourth-largest economy will expand 3.5 percent in 2012, compared with the 3.7 percent estimated in December, the central bank said today in a statement.

South Korea’s Finance Minister Bahk Jae Wan urged members of the Group of 20 nations in a letter to address the increase in crude prices at their meeting in Washington next week.

New York crude has technical support along its 100-day moving average at around $101.73 a barrel today, according to data compiled by Bloomberg. Buy orders tend to be clustered near chart-support levels. Stochastic oscillators have been below a reading of 30 for the past week, signaling further losses may not be sustainable.

Bullish Bets

Hedge funds reduced bullish oil wagers by 24,860, or 11 percent, to 191,827 contracts in the seven days ended April 10, according to the Commodity Futures Trading Commission’s Commitment of Traders report on April 13.

Nigeria’s Movement for the Emancipation of the Niger Delta rebel group threatened to mount “sustained strikes on all pipelines and facilities remotely related to the Nigerian oil industry,” according to a statement from the group on April 14. Nigeria is Africa’s top producer. Attacks by militant groups cut the country’s crude output by more than 28 percent between 2006 and 2009, according to data compiled by Bloomberg.

“There’s certainly a supply-disruption premium of around about $10 to $15 a barrel in the oil prices at the moment,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. (ANZ) in Melbourne, said in Bloomberg Television interview. “We’ve also got bubbling issues in North Africa. There’s enough in the market there I think for investors to want to stay long from a supply point of view.”

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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