Oil held losses below $71 as OPEC signaled it could fill in any supply gap if renewed U.S. sanctions curtail supply from Iran, the group’s third-largest producer.
Futures in New York fell as much as 0.6 percent after sliding 0.9 percent Friday. Three members of the Organization of Petroleum Exporting Countries — Saudi Arabia, Kuwait and the United Arab Emirates — together have enough capacity to act as a cushion, the United Arab Emirates energy minister said. Meanwhile, Iran called for clarity over its nuclear deal with world powers, following U.S. President Donald Trump’s withdrawal from the 2015 pact.
Oil rallied earlier this month to the highest level in more than three years as Trump’s decision to walk away from the Iranian nuclear accord fueled tensions in the energy-rich Middle East. Investors are now weighing signals from OPEC and its allies to see whether they will respond to the situation in Iran by ending a deal to cut production, or maintain the curbs to further prop up prices.
“Even though the reaction to the Iran nuclear deal situation has been bullish, it can be argued that the market is still somewhat confused,” Vienna-based consultant JBC Energy GmbH said in a note. “Rhetoric out of Europe, Iran and even OPEC itself in terms of potential supply compensation makes it really difficult to establish a view with a decent degree of conviction regarding timing and size” of any reduction in supply due to sanctions.
West Texas Intermediate crude for June delivery traded 14 cents lower at $70.56 a barrel on the New York Mercantile Exchange at 10:57 a.m. in London. Prices dropped 66 cents to $70.70 on Friday. Total volume traded was about 18 percent below the 100-day average.
Brent for July settlement slipped 11 cents to $77.01 a barrel on the London-based ICE Futures Europe exchange. The contract declined 0.5 percent to $77.12 on Friday. The global benchmark crude traded at a $6.45 premium to July WTI.
Also read: OPEC’s Output Deal Will Shrug Off Iran Sanctions: Julian Lee
Futures for September delivery were down 1.2 percent at 465.5 yuan a barrel on the Shanghai International Energy Exchange. The contract closed 1.1 percent lower on Friday.
Forecasts for supply losses from Iran vary from “little impact” anticipated by Barclays Plc to losses of 500,000 to 1.5 million barrels a day predicted by BMI Research and consultant FGE.
In a Bloomberg television interview, U.A.E. Energy Minister Suhail Al Mazrouei said “don’t worry about supply,” because OPEC has an adequate “buffer” of potential production to offset barrels lost from a re-imposition of sanctions. He serves this year as the cartel’s president.
In Beijing, Iranian Foreign Minister Javad Zarif met with his Chinese counterpart Wang Yi at the Asian nation’s invitation, marking his first stop on a diplomatic tour after the U.S. withdrew from the nuclear deal. The two parties didn’t disclose whether the world’s biggest crude importer will scale back purchases in light of the renewed sanctions. Zarif is scheduled to meet the British, French and German foreign ministers this week.
Other oil-market news:
European countries and companies that continue to do business with Iran could face U.S. sanctions, National Security Adviser John Bolton said Sunday. Iran can shift 1 million barrels a day of Europe-bound oil exports to Asia, mostly to China and India, Cinda Securities wrote in a note dated May 11. The U.S. added 10 working oil rigs last week, with the total number rising to the highest since March 2015, according to data from Baker Hughes. Hedge funds reduced their WTI net-long position — the difference between bets on a price increase and wagers on a drop — by 1.8 percent to 410,608 futures and options during the week ended May 8, according to the U.S. Commodity Futures Trading Commission. The Cboe/Nymex Oil Volatility Index dropped 3.3 percent on Friday to the lowest level since April 6. Rosneft PJSC reported a jump in free cash flow and almost halved short-term debt in the first quarter, boosting investor confidence ahead of a planned $2 billion share buyback.
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