WTI Declines Amid Debt Talks, Iran Nuclear Negotiations

West Texas Intermediate crude declined as traders waited for U.S. lawmakers to reach a deal on the nation’s debt ceiling, while Western governments hold talks with Iran on its nuclear program.

Futures slipped as much as 0.8 percent. World powers reacted with optimism to Iranian proposals on ways to end a decade-long nuclear standoff as the first international talks since Hassan Rouhani was elected president started in Geneva. Ineos Group Holdings SA said it is shutting down the 210,000 barrel-a-day Grangemouth refinery in Scotland before a labor strike that could halt flows from the Forties Pipeline System, used to ship 45 percent of the U.K.’s North Sea oil output.

“There is a general pressure on prices trending down,” Nansen Saleri, chief executive officer of Houston-based consulting firm Quantum Reservoir Impact, said from Istanbul in an interview with Bloomberg Television. “The potential easing of sanctions on Iran” could lower the price of oil.

WTI for November delivery declined as much as 84 cents to $101.57 a barrel in electronic trading on the New York Mercantile Exchange, and was at $101.87 as of 12:44 p.m. London time. Trading volume was about 27 percent below the 100-day average.

Brent Loss

Brent for November settlement, which expires tomorrow, was 79 cents lower at $110.25 a barrel on the London-based ICE Futures Europe exchange. The more-active December contract lost 68 cents to $109.56. The front-month European benchmark was at a premium of $8.37 to WTI after narrowing for the first time in six sessions yesterday to $8.63.

Brent may slip below $100 a barrel for the first time since June should discussions on Iran’s nuclear program lead to the easing of sanctions, according to a Bloomberg survey.

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 the easing of 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 crude would drop by $12 a barrel, according to the mean estimate of 19 traders and analysts surveyed by Bloomberg News yesterday. Prices rose 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.

Debt Agreement

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.

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

Keep Spinning

Oil prices seem to assume the world will keep spinning after Oct. 17,” said Michael Poulsen, an analyst at Global Risk Management in Middlefart, Denmark. “Though the U.S. has technically defaulted a couple of times in the past, with the current hype around the potential impact, we don’t think it’s likely to happen this time.”

Ineos is performing a “safe shutdown of the site” at Grangemouth, Richard Longden, a company spokesman, said by phone from London. Ineos is due to continue talks with labor union Unite to avoid a full shutdown of the plant after a 48-hour strike planned for Oct. 20.

Grangemouth supplies power and steam to BP Plc (BP/)’s neighboring Kinneil processing plant, which handles oil from the Forties Pipeline System. The FPS network is scheduled to load 387,000 barrels a day of crude in October, according to a shipping program obtained by Bloomberg News. Crude is gathered from more than 80 fields, according to BP.

Forties is the most abundant and typically the cheapest of the four North Sea crudes used to set the Dated Brent benchmark. The other grades are Brent, Oseberg and Ekofisk.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net

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

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