Bloomberg News

WTI Oil Gains as UN Officials Fail to Reach Iran Deal

February 14, 2013

West Texas Intermediate oil rose for the third time this week as United Nations nuclear inspectors failed to reach a deal with Iran and fewer Americans than forecast filed applications for unemployment benefits.

Futures advanced 0.3 percent as UN officials said they didn’t secure an agreement that would allow access to atomic facilities and couldn’t settle on a date for another meeting, indicating that sanctions on the country may remain in place. Gains accelerated after a report showed jobless claims fell by 27,000 last week, signaling fuel demand may grow.

“We did get a little bit of a support from Iran,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The market really gave up hopes on these talks. Jobless claims are pretty good and the economic data is supportive.”

Crude oil for March delivery rose 30 cents to settle at $97.31 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 5.2 percent below the 100-day average at 3:22 p.m. Prices have advanced 6 percent this year. Open interest of West Texas Intermediate futures on the Nymex climbed to a record yesterday, according to exchange owner CME Group Inc.

Brent oil for April settlement gained 12 cents to end the session at $118 on the London-based ICE Futures Europe exchange. The volume of all futures traded was 4.6 percent below the 100- day average. The March contract settled at $118.72 when it expired yesterday.

WTI-Brent Spread

The front-month European benchmark grade was at a premium of $20.10 to the April West Texas Intermediate contract, based on settlement prices. The gap expanded to $23.18 on Feb. 8, the widest level since Nov. 26.

Brent erased a decline of as much as 0.5 percent after tanker tracker Oil Movements said OPEC will cut crude shipments by 0.9 percent this month. Brent came under pressure earlier as the European Union’s statistics office reported that the euro- area recession in the fourth quarter, with the worst performance in almost four years.

“WTI is still set to breach resistance at $98 a barrel, it just needs the proper catalyst,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The poor European GDP numbers earlier today probably kept us from building a good head of steam.”

Iran Talks

A team of UN officials, led by Herman Nackaerts, the International Atomic Energy Agency’s chief inspector, met yesterday with Iranian officials to win access to people and places, including a military base in Parchin, about 20 kilometers (12 miles) southeast of Tehran. The IAEA says it was provided with intelligence that Iran may have built a blast chamber for testing nuclear-weapons components at the site.

“Time is needed to reflect on a way forward,” Nackaerts said today at Vienna International Airport after returning from the one-day meeting in Tehran. The IAEA has an “unwavering” commitment to negotiations, he said.

Iran is under sanctions on its oil sales because of its nuclear program, which the U.S. and its allies say is designed to make an atomic weapon, a charge the Islamic republic denies. The country’s crude shipments fell at least 36 percent to less than 1 million barrels a day in January and output slumped to 2.65 million a day, the least in more than three decades, the International Energy Agency said yesterday.

New York futures advanced after Labor Department figures showed that 341,000 new jobless applications were filed in the week ended Feb. 9. Economists surveyed by Bloomberg projected 360,000 filings, according to the median of projections.

Macroeconomic Optimism

“There are three reasons for the strength of the market, starting with macroeconomic optimism,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York. “The fundamentals are defiantly tighter with increasing demand in China and the U.S., and we’re seeing a geopolitical premium in the price.”

U.S. fuel demand climbed and stockpiles slipped sending gasoline to the highest level in more than four months and providing support for the crude market, said Kyle Cooper, director of commodities research at IAF Advisors in Houston.

Total products supplied, a measure of fuel demand, jumped 5.5 percent last week to 19 million barrels a day, the Energy Information Administration, the Energy Department’s statistical arm, reported yesterday. It was the highest level since Dec. 14.

Gasoline for March delivery advanced 8.12 cents, or 2.7 percent, to $3.1166 a gallon in New York, the highest settlement level since Sept. 28.

“Crude oil isn’t doing that much but gasoline continues to move higher,” Cooper said. “It looks like we’re seeing a delayed reaction from yesterday’s inventory report.”

OPEC Exports

The Organization of Petroleum Exporting Countries will export 23.51 million barrels a day in the four weeks to March 2, down 220,000 a day from 23.73 million in the previous period, amid lower production by Saudi Arabia, Oil Movements said today.

Saudi Arabia, the world’s largest crude exporter, pumped 9.1 million barrels a day this month, the lowest level since May 2011, a Bloomberg survey of oil companies, producers and analysts showed.

Electronic trading volume on the Nymex was 441,846 contracts as of 3:22 p.m. It totaled 706,370 contracts yesterday, 35 percent above the three-month average. Open interest was a record 1.67 million.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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