Brent crude declines for a third day before Iran nuclear talks

Bloomberg

Brent crude slid for a third day as investors weighed the likelihood that international talks with Iran on the country’s nuclear program may help ease sanctions that have curbed oil exports from the Persian Gulf producer.

Futures fell as much as 0.3 percent in London while West Texas Intermediate crude dropped for the second time in three days in New York. Diplomats from Western nations will meet their Iranian counterparts in Geneva today for two days of talks, the first round of negotiations over the program since Hassan Rouhani was elected president. Brent may slip below $100 a barrel for the first time since June should discussions lead to easing sanctions, according to a Bloomberg survey.

“There’s still a long way to go with Iran,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. Investors will be watching for “any news or concrete discussions that increase the likelihood” of the removal of sanctions, he said.

Brent for November settlement, which expires tomorrow, decreased as much as 35 cents to $110.69 a barrel on the London-based ICE Futures Europe exchange. It was at $110.79 at 2:58 p.m. Singapore time. The more-active December contract slid 24 cents to $110. The front-month European benchmark crude was at a premium of $8.66 to WTI futures after narrowing for the first time in six sessions yesterday to $8.63.

WTI for November delivery was at $102.17 a barrel, down 24 cents, in electronic trading on the New York Mercantile Exchange. The contract rose 39 cents to $102.41 yesterday. Trading volume was about 53 percent below the 100-day average.
Iran Affect

Iran’s negotiations with diplomats from China, France, Germany, Russia, the U.K. and U.S. have analysts forecasting a drop in Brent should the talks lead to easing sanctions. The possibility for a revival of Iranian oil exports coincides with Saudi Arabia producing at the fastest pace in three decades and the U.S. pumping the most crude since 1989.

The benchmark grade used to price more than half the world’s oil would decline by $12 a barrel, according to the mean estimate of 19 traders and analysts surveyed by Bloomberg News yesterday. Prices rose to as high as $128.40 in March 2012 as the U.S. and European Union moved to tighten sanctions on Iran in response to its nuclear program.

Estimates for how much Brent would drop if Iranian sanctions are removed ranged from $4 to $29 a barrel in the Bloomberg survey, which included respondents from New York to London and Singapore.
U.S. Debt

Oil prices are reasonable, Youcef Yousfi, the energy minister for Algeria, said today at the World Energy Congress in Daegu, South Korea. Members of the Organization of Petroleum Exporting Countries will discuss 2014 production at its December meeting, Yousfi said.

WTI rose 0.4 percent yesterday as U.S. lawmakers continued to seek an accord to prevent the nation from breaching its debt ceiling. Senate Democratic and Republican leaders said they have made progress toward a resolution as the government’s borrowing authority is due to lapse on Oct. 17.

The potential debt agreement in the U.S. would suspend the limit through Feb. 7, 2014, fund the government through Jan. 15 and require a House-Senate budget conference by Dec. 13, according to a Senate source familiar with the talks who spoke on condition of anonymity. The U.S. is the world’s largest oil user, accounting for 21 percent of global consumption last year, BP Plc’s Statistical Review of World Energy shows.

If Congress does nothing, the federal government will run out of borrowing authority and start missing payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.