Oil Pares Monthly Gain as U.S. Rigs Offset Iran-Deal Risk

Oil fell as the U.S. oil rig count rose for a fourth week, but was still poised for a second monthly advance.

Futures in New York are up 3.8 percent this month, even after a 1 percent drop on Monday, following data that showed an increase in U.S. drilling activity. The dollar acted as a further headwind, rising 0.4 percent. U.S. President Donald Trump faces a May 12 deadline to decide whether to remain part of a 2015 multinational nuclear deal with Iran, or to leave and reimpose sanctions on the Middle Eastern producer.

Oil has surged to levels last seen in 2014 as issues including the conflict in Syria and 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 limit price increases.

“Obviously the rig count that came on Friday was quite bearish,” said Torbjorn Kjus, chief oil analyst at DNB Bank ASA. “There’s a lot of profit in the books here for the non-commercials. You shouldn’t be surprised if there’s a $5 flush out and some profit taking.”

West Texas Intermediate crude for June delivery traded at $67.44 a barrel on the New York Mercantile Exchange, down 66 cents, at 8:25 a.m. in New York. Total volume traded was about 22 percent below the 100-day average. The contract fell 0.4 percent last week.

Brent crude for June settlement, which expires Monday, dropped 64 cents to $74 a barrel on the London-based ICE Futures Europe exchange. Prices are up 5.3 percent for the month. The global benchmark crude traded at a $6.57 premium to June WTI. The more-active July contract traded at $73.21.

Trading on the Shanghai International Energy Exchange is closed for a Chinese public holiday.

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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 units. 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.

Oil-market news:

Hedge funds reduced their WTI net-long position — the difference between bets on a price increase and wagers on a drop — by 2.1 percent to 433,118 futures and options during the week ended April 24, according to the U.S. Commodity Futures Trading Commission. Marathon Petroleum Corp. agreed to buy rival oil refiner Andeavor for $23.3 billion in a deal that would create the largest independent fuel maker in the U.S. Saudi Aramco, the world’s biggest crude exporter, appointed new board members with experience in international oil and petrochemical businesses as it plans a possible overseas share sale in what could be a record initial public offering. Europe’s oil refineries are increasingly missing out on Russian crude as the world’s biggest energy producer directs more and more barrels by pipeline to China.