Oil Rebounds on Spanish Bill Auction, Iran Nuclear Talks

Oil rebounded along with equity markets as Spanish bond prices recovered after the government met its target at a debt auction.

Futures in New York rose as much as 0.5 percent, after dropping 1.2 percent, as the cost of insuring Spain’s debt fell from a record. Greek political leaders may agree as soon as today to form a government and to seek relief from austerity measures, also helping ease concern that Europe’s debt crisis will curb fuel demand. Talks with Iran, OPEC’s second-largest producer, resumed today in Moscow over its nuclear program.

“Spain had to pay much higher interest rates for its bills, but attracted sufficient buying interest, which is apparently seen as positive,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “Supply risks are not really an issue at the moment.”

Oil for July delivery, which expires tomorrow, rose as much as 44 cents to $83.71 a barrel in electronic trading on the New York Mercantile Exchange. It was at $83.33 at 1:45 p.m. London time. The more-actively traded August contract rose 2 cents to $83.62 a barrel today. Front-month prices are 15 percent lower this year.

Brent oil for August settlement was at $95.92 a barrel, down 13 cents, on the London-based ICE Futures Europe exchange. It slipped $1.56 yesterday to $96.05. The front-month European benchmark contract was at a premium to West Texas Intermediate of $12.21, compared with $12.45 yesterday.

Spain, Iran

Spain sold 3.04 billion euros ($3.8 billion) of bills, compared with a target of 3 billion euros. Federal Reserve policy makers will begin a two-day meeting today as Group of 20 leaders focus their response to Europe’s financial crisis at a summit in Mexico. Stocks and the euro pared gains earlier after Greek leaders said they would seek to renegotiate the terms of an international bailout.

The five hours of meetings over Iran’s nuclear program were “constructive and serious,” Ali Bagheri, Iran’s deputy negotiator, told reporters. The talks were “very intense” and more substantive than those in Baghdad last month, according to Michael Mann, a foreign-policy spokesman for the European Union.

The so-called P5+1 group wants Iran to suspend production of uranium enriched to 20 percent, while the Islamic republic is pressing for relief from sanctions set to tighten when an EU oil embargo kicks in on July 1. European insurers and shipping companies carrying Iranian crude to other parts of the world will be affected and shouldn’t expect relief, Mann said in the Russian capital.

Nuclear Program

Brent has dropped 21 percent since April 14, when the first international talks with Iran on its nuclear program in 15 months were held in Istanbul. Chinese, French, German, Russian, British and U.S. delegates met with their Iranian counterparts yesterday for a third round of discussions over two days at a hotel near Russia’s Foreign Ministry.

U.S. President Barack Obama said he and Russian President Vladimir Putin agreed at the Group of 20 summit in Mexico that “there’s still time and space” for a diplomatic resolution to tension over Iran’s “potential development” of nuclear weapons.

U.S. crude supplies probably dropped 1.3 million barrels last week, according to the median estimate of seven analysts in a Bloomberg News survey before a report from the Energy Department tomorrow. Gasoline and distillate stockpiles each rose 1 million barrels, the survey shows.

Federal Reserve

The American Petroleum Institute will release separate inventory data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Federal Reserve officials begin a two-day meeting today to consider measures to stimulate the world’s biggest economy. The dollar slid against the euro amid prospects that policy makers will consider further stimulus to sustain the U.S. economy.

“The real global focus will be on the U.S. Federal Reserve FOMC meeting tomorrow, since a few market participants are still waiting and hoping for the U.S. Fed to trigger a new round of something that can boost global markets,” Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland, said in a report today.

Enbridge Inc. (ENB) said it expects to boost capacity on its Seaway pipeline to 400,000 barrels a day by the end of this year. The line is already transporting its current capacity of 150,000 barrels a day from Cushing, Oklahoma, to the U.S. Gulf Coast, Enbridge President Al Monaco said yesterday in Toronto. Enterprise Products Partners LP (EPD), which owns the pipeline along with Enbridge, previously said the line’s capacity would be increased by the first quarter of 2013.

To contact the reporters on this story: Sherry Su in London at lsu23@bloomberg.net; Rupert Rowling in London at rrowling@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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