Published: Wed, May 02, 2018
Money | By Michele Stevens

Oil edges up as Israel sets announcement on Iran deal

Oil edges up as Israel sets announcement on Iran deal

Brent prices have gained almost 6 percent this month, buoyed by expectations the United States will renew sanctions.

The sentiment Thursday shifted from earlier in the week, when oil prices fell after Trump said the US and France could reach an agreement "fairly quickly" on the Iran nuclear deal.

Trump will decide by May 12 whether to restore USA sanctions on Tehran, which would likely result in a reduction of its oil exports.

Brent crude futures rose 6 cents to $74.80 a barrel, a 0.1 percent gain, by 1:11 p.m. EDT (1711 GMT).

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While US defense secretary Jim Mattis said last week that there's been no decision on the nuclear deal, the nervousness around a potential breakdown in the accord is also spilling over into the physical oil market.

Supply disruptions in Iran will have a stronger bullish influence on Brent prices, while rising USA inventories and production has a bigger impact on WTI prices.

French President Emmanuel Macron said Wednesday he expects U.S. President Trump to pull out of a deal with Iran reached in 2015, in which Iran suspended its nuclear program in return for Western powers lifting sanctions.

U.S. West Texas Intermediate crude oil is trading lower early Friday, putting the market in a position to close lower for the week. The price rose to $75.47 last week, the highest since November 2014.

Buyers were pressing for lower levels in part because of good availability of crude in Europe and the US and a wide gap between Brent and the US WTI benchmarks.

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The risk of the US pulling out of the Iran nuclear deal, resulting in sanctions on the producing nation, has already largely been priced in, underpinning the market, he said. The more-active July contract traded at $73.16. "Since the market is already tight because of the high production outages in Venezuela and the production cuts implemented by OPEC and Russian Federation, any further reduction of supply weighs all the more heavily", the bank said. At the same time, OPEC-led production cuts have continued to tighten global markets, despite record-setting U.S. crude output. USA crude production rose by 46,000 BPD the previous week, to 10.59 MMBPD.

A strong US dollar also weighed on crude prices, as the USA dollar index hit its highest level since January.

Because of the tighter market, the forward curve for Brent is now above $70 per barrel until the end of 2018, and prices are above $60 per barrel through 2020.

US crude inventories likely rose by 1.3 million barrels last week, while gasoline and distillate stockpiles fell, a preliminary Reuters poll showed on Monday ahead of data by the Industry group the American Petroleum Institute later in the day.

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