Oil steadies around $103 on Iran, Fed doubts
London, June 6, 2013
Brent crude oil steadied around $103 a barrel on Thursday as a drop in U.S. oil stocks and lower Iranian exports balanced worries the U.S. Federal Reserve may scale back its economic stimulus.
Expectations that the U.S. Federal Reserve will roll back its stimulus, putting a brake on global economic growth this year, kept financial markets on edge and helped push Asian shares to 2013 lows on Thursday.
But a sharp fall in U.S. crude inventories and signs of a further drop in sales of crude by Iran to Asia supported prices higher despite signs the market is oversupplied.
Rising tension between Iran and the West also stoked Middle East supply worries as U.S. lawmakers sought to tighten sanctions against the Islamic Republic over its nuclear plans.
"The Iranian news is supporting prices," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. "But it remains to be seen how long this can last. Lower Iranian exports will reduce the global oversupply, but not by much."
"In view of the comfortable supply situation and growing U.S. oil production, supply shortages on the global oil market are not likely."
Brent crude oil futures for July slipped 15 cents to $102.89 a barrel by 1115 GMT. U.S. oil rose 40 cents to $94.14 per barrel.
Data from the U.S. Energy Information Administration (EIA) on Wednesday showed U.S. crude oil stockpiles fell 6.3 million barrels last week, much more than a 400,000 barrel decline forecast by analysts polled by Reuters.
Inventories shrank as imports tumbled, while gasoline stocks along the East Coast fell at the start of the driving season.
"Good refining margins present an incentive to run refinery capacity, but current utilisation levels are nonetheless only at the five-year average for this time of year," analysts at BNP Paribas said in a note.
U.S. crude oil inventories remain close to an all-time high and stocks elsewhere are also plentiful at a time of ample supply from oil producers inside and outside of OPEC.
But there have been some signs of tightening oil supplies.
Data showed Iranian exports have fallen sharply in recent weeks with crude shipments dropping to just 700,000 barrels per day (bpd) last month, about a third of Iran's oil exports before the current round of sanctions.
The United States said on Wednesday it was "deeply troubled" by Iran's plans to start a reactor in 2014 that could yield nuclear bomb material, highlighting concerns about the heavy water reactor Tehran is building near the town of Arak.
U.S. lawmakers are embarking this summer on a campaign to deal an even deeper blow to Iran's diminishing oil sales. Analysts say the ultimate goal could be a near total cut-off. – Reuters