Oil Settles Higher On Iran Jitters

NEW YORK--Crude-oil futures rose 2% as Iran cast doubt about the success of upcoming talks, although inventory data out of the U.S. undercut the rally.

Light, sweet crude for July delivery rose $1.49, or 1.8%, to $85.78 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe rose $1.93, or 1.9%, to $100.77 a barrel, returning to above $100 for the first time in three sessions.

Futures extended earlier gains following reports that Iran told the European Union that delays in preparing for the next round of nuclear talks cast doubt on their success. Iran is scheduled to meet in Moscow later this month for the third round of talks with Western powers over its nuclear program.

"Iran's got such a track record of dishonesty and evasion that I have a difficult time seeing the whole Iran situation resolving itself smoothly," said Peter Donovan, vice president at Vantage Trading in New York.

Meanwhile, oil prices also got a boost as the dollar slid against the euro after some members of the European Central Bank appeared to favor a rate cut. The ECB in a meeting ultimately left rates unchanged. A weaker dollar tends to boost oil prices by making the dollar-denominated commodity more expensive for holders of other currencies.

"There's a lot of bullish news surrounding crude right now," said Carl Larry, president of trading advisory firm Oil Outlooks and Opinions in New York.

Futures held onto their gains even after the Energy Information Administration said in its closely watched inventory survey that U.S. crude stockpiles fell less than expected.

Crude stocks last week fell 100,000 barrels, according to the EIA, compared with a drop of 500,000 barrels expected by analysts surveyed by Dow Jones Newswires.

Gasoline stockpiles, meanwhile, rose 3.3 million barrels. Stocks of distillates, including heating oil and diesel, rose 2.3 million barrels. Analysts expected gasoline inventories to rise just 400,000 barrels, while distillate stocks were seen climbing 200,000 barrels.

Late Tuesday, the American Petroleum Institute, an industry group, said its own survey showed crude stockpiles dropped by a greater-than-expected 1.8 million barrels last week, as refineries ramped up utilization rates.

The drop in oil inventories snaps nine straight weeks of rising stockpiles. U.S. inventories had been at their highest level in 22 years.

But much of the market's attention remains on Iran. Signs of diplomatic progress between the Islamic republic and Western countries over its nuclear program has helped take the steam out of oil prices in recent months, as fears over an imminent supply disruption have eased.

Even without an agreement with Iran, the oil market remains well supplied, said analysts at Morgan Stanley, adding that developed countries could coordinate a release of global crude stockpiles.

Front-month July reformulated gasoline blendstock, or RBOB, recently rose 2.57 cents, or 0.9%, to $2.7104 a gallon. July heating oil recently gained 4.70 cents, or 1.8%, to $2.6806 a gallon.

Write to Dan Strumpf at [email protected]

(END) Dow Jones Newswires
06-06-120325ET
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