April 25, 2018, by Tsuyoshi Inajima and Grant Smith
Oil steadied amid signs that French President Emmanuel Macron was struggling in his push for a new deal that might prevent further U.S. sanctions on Iran.
Futures in New York were little changed after dropping 1.4 percent Tuesday. Macron proposed negotiating a new agreement that would curb Iran’s ballistic missile development and nuclear program ahead of next month’s decision by President Donald Trump on whether the U.S. will withdraw from the deal and reimpose sanctions on oil exports. Fears of an increase in U.S. crude inventories also weighed on prices.
Oil has surged more than 7 percent this month on concern geopolitical risk in the energy-rich Middle East is intensifying, with Trump set to decide whether to extend Iran’s sanctions relief on May 12. While the Organization of Petroleum Exporting Countries and its allies concluded that they have all but wiped out a global crude surplus, fears remain that U.S. drillers may continue boosting output to record levels and offset the group’s effort to balance the market.
“It will be an uphill challenge for Macron to craft an agreement that is tough enough to satisfy Trump and his hawkish advisers and at the same time is acceptable to the Iranian leadership,” said Helima Croft, head of commodity strategy at RBC Capital Markets LLC in New York.
West Texas Intermediate crude for June delivery traded at $67.88 a barrel on the New York Mercantile Exchange, up 18 cents, at 10:16 a.m. in London. Total volume traded was about 16 percent below the 100-day average.
Brent crude for June delivery was at $73.99 a barrel on the London-based ICE Futures Europe exchange, up 13 cents. Prices fell 85 cents to $73.86 a barrel on Tuesday. The global benchmark crude traded at a $6.16 premium to June WTI, near the widest level since January.
Futures for September delivery fell 2.1 percent to 438 yuan a barrel on the Shanghai International Energy Exchange. The contract climbed 1.7 percent to close at 447.3 yuan on Tuesday.
Macron’s remarks at a White House news conference came after Trump earlier warned Iran not to restart its nuclear program even if the U.S. withdraws from the 2015 nuclear accord with the Islamic Republic.
Iran’s oil exports would drop as much as 500,000 barrels a day this year and 700,000 barrels a day in 2019 if the U.S. revives sanctions, according to Fereidun Fesharaki, chairman of energy consultant FGE. If reimposed, U.S. sanctions would require buyers of Iranian crude to cut purchases within 180 days, he said. Iran produced about 3.81 million barrels day in March, according to data compiled by Bloomberg.
Meanwhile, the American Petroleum Institute was said to report U.S. crude inventories increased by 1.1 million barrels last week. That comes against forecasts for a 2.2 million-barrel decline, according to a Bloomberg survey before government data due Wednesday. In the Permian basin, output is forecast to reach 3.18 million barrels a day in May, the highest since the Energy Information Administration began compiling records in 2007.
Other oil-market news:
The world’s biggest oilfield service companies, Schlumberger Ltd. and Halliburton Co., have a message for investors: There’s a payoff for patience. Crude in West Texas is the cheapest in three years versus Brent as an output surge in the past year outpaced pipeline construction and filled existing lines.