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Oil held losses below $71 as OPEC signalled it has enough spare capacity to mitigate any impact on markets even if renewed US sanctions on Iran curbs exports from the group’s third-largest producer.
Futures in New York fell as much as 0.5% after sliding 0.9% on Friday. Three members of the Organisation of Petroleum Exporting Countries - Saudi Arabia, Kuwait and the United Arab Emirates - together have enough capacity to act as a cushion, the UAE energy minister said.
Meanwhile, Iran called for clarity over its nuclear deal with world powers, following US President Donald Trump’s withdrawal from the 2015 pact.
Oil has extended a rally this month to the highest level in more than three years as Trump’s decision to walk away from the Iranian nuclear accord fuelled tensions in the energy-rich Middle East and raised concerns over supply disruptions. Investors are now weighing signals from OPEC and its allies to see whether they will end a deal to cut production aimed at shrinking a glut or seek an extension to further prop up prices.
The remarks from Middle East producers “did force investors to look a little bit closer at the impact of US sanctions on Iran and certainly there’s some questions about the impact that we’ll eventually see,” Daniel Hynes, a senior commodities strategist at the Australia & New Zealand Banking, said by phone from Sydney.
“For the moment, investors are cautious to any sort of supply disruption, considering the tightness that we’re seeing.”
West Texas Intermediate crude for June delivery traded 24 cents lower at $70.46 a barrel on the New York Mercantile Exchange at 2:37 pm in Singapore. Prices dropped 66c to $70.70 on Friday. Total volume traded was about 24% below the 100-day average.
Brent for July settlement slipped 36c to $76.76 a barrel on the London-based ICE Futures Europe exchange. The contract declined 0.5% to $77.12 on Friday. The global benchmark crude traded at a $6.34 premium to July WTI.
Futures for September delivery were down 1.2% at 465.5 yuan a barrel on the Shanghai International Energy Exchange. The contract closed 1.1% lower on Friday.
While forecasts 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, UAE Energy Minister Suhail Al Mazrouei said “don’t worry about supply.”
OPEC has an adequate “buffer” of potential production to offset barrels lost from a re-imposition of Iranian sanctions, he said in an interview with Bloomberg Television. He serves this year as the group’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 US 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 US sanctions, National Security Adviser John Bolton said on 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 US 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% to 410 608 futures and options during the week ended May 8, according to the US Commodity Futures Trading Commission.
• The Cboe/Nymex Oil Volatility Index dropped 3.3% on Friday to the lowest
level since April 6.
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