Brent Oil Falls as Iran Nuclear Talks Extended; WTI Drops

Brent crude declined from the highest closing price in seven sessions as the U.S. and Iran extended nuclear talks to July 1. West Texas Intermediate was down in New York.

Futures fell as much as 0.8 percent in London, reversing an earlier gain, as investors weighed the outcome of the OPEC meeting Nov. 27 and the nuclear talks, which were originally due to conclude today. Negotiators from Iran, the U.S. and other world powers will now seek a political deal by March 1, with a deadline of July 1 to agree on details, according to officials present at negotiations in Vienna.

Oil is trading in a bear market as the U.S. pumps at the fastest rate in more than three decades and demand growth weakens. Some OPEC producers are resisting calls to reduce supply while Venezuela and Ecuador seek action to support prices ahead of discussions in Vienna.

“Vienna will be the capital of oil headlines throughout the week but the outcome both of the nuclear negotiations and OPEC are hard to predict,” Olivier Jakob, managing director of Zug, Switzerland-based researcher Petromatrix GmbH, said by e-mail. “The result of the OPEC meeting is dependent on the result of the Iran negotiations,” meaning an extension of talks could also result in OPEC delaying its decision, he said.
Nuclear Talks

Brent for January settlement was down 18 cents to $80.18 a barrel on the London-based ICE Futures Europe exchange at 1:30 p.m. local time. It earlier gained as much as 0.6 percent to $80.85. Futures closed at $80.36 on Nov. 21, the highest since Nov. 12, marking the first weekly advance since September. The European benchmark crude traded at a premium of $3.88 to WTI.

WTI for January delivery lost 21 cents to $76.30 a barrel in electronic trading on the New York Mercantile Exchange. The contract climbed 0.9 percent last week to $76.51 a barrel. The volume of all futures traded was about 38 percent below the 100-day average for the time of day. Prices have declined 23 percent this year.

Negotiators have been warning for days that extending the yearlong talks over Iran’s nuclear program may be necessary because of the major disagreements between the sides. The new timeframe emerged as U.S. Secretary of State John Kerry and envoys from his P5+1 partners -- China, France, Germany, Russia and the U.K. -- ended a meeting with Iranian Foreign Minister, Mohammad Javad Zarif, and European Union envoy, Catherine Ashton, in the Austrian capital.

Iran says its nuclear program is solely for energy and industrial uses. A year-old interim accord, aimed at ending Iran’s isolation from the U.S. and its allies by restricting its nuclear ambitions in exchange for sanctions relief, was set to expire at midnight.
OPEC Cut

Iranian Oil Minister Bijan Namdar Zanganeh may propose a cut of 1 million barrels a day in OPEC output when he meets Saudi Arabia’s Ali Al-Naimi, according to Iran’s state-run Mehr News agency. An official at Iran’s oil ministry didn’t comment on the report when contacted by phone yesterday. OPEC will focus on supply and demand at its meeting, Suhail Al Mazrouei, the energy minister of the United Arab Emirates, said in comments on Twitter.

The days are long gone when OPEC could almost guarantee consensus when deciding output levels, according to Abdullah Bin Hamad Al Attiyah, the former Qatari oil minister who participated in the group’s policy meetings from 1992 to 2011. There’s an oversupply of about 2 million barrels a day, while global economic growth is below expectations, he said in a phone interview on Nov. 19.
Hedge Funds

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, produced 30.97 million barrels a day in October, exceeding its collective target of 30 million for a fifth month, data compiled by Bloomberg show.

Russia might coordinate a production cut with OPEC next year to boost crude prices, Kommersant reported. The nation may agree to reduce output by 15 million tons, or about 300,000 barrels a day, next year, the Moscow-based newspaper said, citing unidentified people close to the government. OPEC would in turn commit to a reduction of about 1.4 million barrels a day, it said.

Hedge funds turned less bullish on WTI, reducing net-long positions by 4.1 percent in the week ended Nov. 18, U.S. Commodity Futures Trading Commission data show. Outstanding futures contracts fell to the lowest level in more than two years.

On Brent, hedge funds cut bullish bets for the first time in four weeks, according to data from ICE Futures Europe. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 61,169 lots, the exchange said today in its weekly Commitments of Traders report.

(An earlier version of this story corrected the name of Iran’s oil minister.)

To contact the reporter on this story: Rupert Rowling in London at [email protected]

To contact the editors responsible for this story: Alaric Nightingale at [email protected] James Herron, Bruce Stanley

Bloomberg