Brent Rises After Iran Talks Fall Short of Agreement

Brent crude rose for a second day after Iran and six world powers failed to agree on curbs to the Persian Gulf nation’s nuclear program, tempering expectations of an end to the decade-long stalemate.

Futures increased as much as 0.8 percent in London while West Texas Intermediate fell 0.5 percent. International Atomic Energy Agency chief Yukiya Amano is leading inspectors to Tehran for negotiations today after Iran’s talks in Geneva with permanent members of the United Nations Security Council and Germany over the weekend ended without a deal. Prices also climbed as Chinese government data showed an expansion in industrial production in October.

“Almost a deal is still not a deal,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Normally, the prospect of Iranian oil coming back to the market should be weighing on prices, but the price reaction will depend on the current market sentiment.”

Brent for December settlement rose as much as 82 cents to $105.94 a barrel on the London-based ICE Futures Europe exchange and was at $105.59 as of 1:18 a.m. London time. The volume of all futures traded was 21 percent more than the 100-day average. Prices fell 0.8 percent last week.

WTI for December delivery dropped as much as 49 cents to $94.11 a barrel in electronic trading on the New York Mercantile Exchange. Prices slid 1 cent last week to cap a fifth weekly decline. WTI was at a discount of $11.33 to Brent, the benchmark grade for half the world’s crude.

Nuclear Program

Brent gained 1.6 percent on Nov. 8, the most since Oct. 28, after U.S. Secretary of State John Kerry downplayed the chances of an accord. Iran’s oil output has decreased 16 percent since the U.S. and the European Union tightened sanctions in July 2012 to curb its nuclear program.

Iran says its atomic development is for civilian energy and medical use and that it has a right to enrich uranium for peaceful purposes. The U.S. and its allies say Iran is covertly seeking nuclear-weapons capability. The talks in Geneva included envoys from Russia, China, U.K. and France.

Futures will probably decline if an agreement is reached with Iran, Iraqi Oil Minister Abdul Kareem Al-Luaibi said in an interview in Abu Dhabi yesterday. Brent will drop below $100 a barrel if the curbs on Iranian oil are loosened, according to the mean of 19 estimates from traders and analysts compiled by Bloomberg News on Oct. 14.

Brent has averaged $108.50 this year and last settled below $100 on May 1. Iran is one of 12 members of the Organization of Petroleum Exporting Countries, which has predicted shrinking demand for its shipments amid a surge in U.S. shale production.

Iran Output

“The loosening of the sanctions is the first step toward significant easing in geopolitical tension and political risk in the oil market,” said Michael Lynch, the president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Total SA, Europe’s biggest oil refiner, will resume business with Iran if diplomatic talks lead to the removal of sanctions, Chief Executive Officer Christophe de Margerie said at a conference in Abu Dhabi yesterday.

Iran was the sixth-largest producer in OPEC last month with 2.6 million barrels a day of output, a separate Bloomberg survey of analysts and companies shows. That’s down 565,000 barrels from June 2012, when it ranked second.

Shrinking Economy

The oil embargo has cost Iran about $100 billion in foreign investment and oil revenue, a report by the Carnegie Endowment for International Peace estimated in April. The nation’s economy will contract 1.5 percent this year after shrinking 1.9 percent in 2012, according to International Monetary Fund estimates.

Iranian President Hassan Rouhani, who took office in August, campaigned on a pledge to improve his country’s battered economy, and his government has set a one-year goal to address international concerns about its nuclear program and win relief from sanctions.

Bijan Namdar-Zanganeh, who was appointed by Rouhani as oil minister in August and held the post from 1997 to 2005, said he plans to restore production to pre-2005 levels, according to comments published by his ministry Aug. 11. Iran pumped an average of 3.91 million barrels a day in 2005, data compiled by Bloomberg show.

China, the biggest importer of Iranian crude, reduced purchases by 1.4 percent to about 430,000 barrels a day in the first nine months of 2013, according to data from the nation’s General Administration of Customs. India plans to cut shipments to 11 million metric tons in 2014, from 14 million this year, Oil Secretary Vivek Rae said on Oct. 1 in New Delhi.

China’s industrial output increased 10.3 percent in October from a year earlier, data from the National Bureau of Statistics on Nov. 9 show. That exceeded the median estimate of 10 percent in a Bloomberg survey of economists and the previous month’s 10.2 percent expansion.

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

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

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