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Oil headed for a weekly gain as Iran called for the US to comply with commitments it made under a 2015 nuclear deal that lifted punishing sanctions on OPEC’s third-largest producer.
Futures in New York were little changed on Friday, set for a 0.4% advance this week. Iranian Foreign Minister Mohammad Javad Zarif accused the US of “bullying” businesses into putting off investments in the Middle East nation, days before American President Donald Trump decides whether to pull out from the accord.
A withdrawal would reintroduce sanctions on the Islamic Republic, which could curb its crude exports.
Oil increases in recent weeks have been driven by speculation over the fate of the nuclear deal, as well as rising geopolitical tensions in other parts of the Middle East.
Crude’s also been helped by the Organisation of Petroleum Exporting Countries and its allies including Russia persisting with output curbs to clear a global glut. All that has meant prices are up more than 10% this year even though US production is booming.
“The Iran situation is certainly one of the keys, and the potential for a re-introduction of sanctions against Iran is real, and that’s underpinning prices this week,” Michael McCarthy, chief strategist at CMC Markets, said by phone from Sydney. “There are concerns that prices are elevated, but an outbreak of conflict in the Middle East could also happen very rapidly.”
West Texas Intermediate crude for June delivery was down 3 cents at $68.40 a barrel on the New York Mercantile Exchange at 2:34 pm in Singapore, after rising 0.7% on Thursday. Total volume traded was about 18% below the 100-day average.
Brent crude for July settlement was 1 cent lower at $73.61 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $5.37 premium to July WTI.
Iran’s criticism
Yuan-denominated futures for September delivery were little changed at 447.1 yuan per barrel in afternoon trading on the Shanghai International Energy Exchange. The contract is headed for a 0.6% increase this week.
Iran intensified its criticism of Trump ahead of a May 12 deadline he’s set for making a decision on the accord, stating that there’s “only one way forward and it’s US compliance, not appeasement.” Citing the Islamic Republic’s missile programme and its role in Middle East conflicts, the U.S. president has ridiculed the nuclear agreement reached under his predecessor as “flawed” and a “disaster.”
Meanwhile, the Trump administration’s economic team led by Treasury Secretary Steve Mnuchin was having a “ very good conversation” with China in Beijing as they entered a second day of negotiations over the two countries’ trade relationship. The Asian nation had said earlier it’s not willing to back down on key issues or submit to any US threats.
If there’s “an announcement of an agreement, then it will be positive for prices,” CMC’s McCarthy said. “If the US envoy leaves China without anything solid, then the market may start fretting.”
Other oil-market news:
• The Chicago Mercantile Exchange hiked margins - or the amount traders need to keep on deposit - twice in a week on contracts that track the difference between West Texas Intermediate crude in Midland, Texas, versus the benchmark delivered into Cushing, Oklahoma.
• The Cboe/Nymex Oil Volatility Index was set to increase 0.9% this week, its first weekly gain in three weeks.
• Russia reaffirmed its pledge to an alliance with OPEC, despite two months of breaching its target under a global oil-output deal.
• The flow of Brent crude oil to an export terminal in Scotland was halted this week, a development that will further erode already weak shipments from the North Sea.
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