Crude Drops for Second Day in New York After Iran Talks

Brent crude fell, extending last week’s drop, after the first international talks in 15 months on Iran’s nuclear program yielded an agreement for the parties to reconvene in May.

Brent futures slipped as much as 1.5 percent in London. The United Nations’ five permanent Security Council members plus Germany will meet Iranian delegates in Baghdad on May 23 after “constructive” talks in Istanbul on April 14, the European Union’s foreign policy chief said yesterday. The U.S. benchmark, West Texas Intermediate, pared losses after U.S. retail sales rose more than forecast.

“It’s definitely a step forward that the parties are at least talking again,” said Thorbjorn Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark. “There is a significant risk premium in prices related to Iran, and even small steps towards a solution can have large impacts.”

Brent oil for June settlement dropped as much as $1.80 to $119.41 a barrel on the ICE Futures Europe exchange and was at $120.07 at 1:46 p.m. local time. Futures fell in four of the past five weeks.

Crude for May delivery advanced 15 cents to $102.98 a barrel in electronic trading on the New York Mercantile Exchange. The European benchmark contract’s front-month premium to WTI was at $16.64, compared with $19 on April 13.

Iran Talks

The 0.8 percent gain in U.S. retail sales for March was almost three times as large as projected and followed a 1 percent advance in February, Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for a rise of 0.3 percent. Eleven of 13 categories showed increases.

Brent futures rose 12 percent this year amid concern that tension with Iran may disrupt global supply. Discussions in Istanbul lasted 10 hours and were described as constructive by the Iran’s lead negotiator, Saeed Jalili, and the EU’s foreign policy chief, Catherine Ashton. The Islamic Republic dropped upfront demands, and the discussions focused almost exclusively on the nation’s nuclear program, according to two Western diplomats involved.

Israel’s Prime Minister Benjamin Netanyahu criticized the outcome as giving Iran more time to continue enriching uranium, the process capable of producing fuel for a nuclear bomb. Iran says it’s developing atomic technology for civilian use, including energy and medicine.

“The flavor of those talks did seem a little more positive than the rhetoric of the past,” said David Lennox, an analyst at Fat Prophets in Sydney. “Between $90 and $100 a barrel would appear to be a fair value” for West Texas Intermediate without the Iran premium, he said.

Support Levels

New York crude has technical support along its 100-day moving average at around $101.73 a barrel today, according to data compiled by Bloomberg. Buy orders tend to be clustered near chart-support levels. Stochastic oscillators have been below a reading of 30 for the past week, signaling further losses may not be sustainable.

Hedge funds reduced bullish oil wagers by 24,860, or 11 percent, to 191,827 contracts in the seven days ended April 10, according to the Commodity Futures Trading Commission’s Commitment of Traders report on April 13.

‘Sustained Strikes’

Nigeria’s Movement for the Emancipation of the Niger Delta rebel group threatened to mount “sustained strikes on all pipelines and facilities remotely related to the Nigerian oil industry,” according to an April 14 statement.

Eni SpA suffered damage to an oil pipeline last week, for which the rebel group claimed responsibility. Nigeria is Africa’s top producer.

“There’s certainly a supply-disruption premium of around about $10 to $15 a barrel in the oil prices at the moment,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a Bloomberg Television interview. “We’ve also got bubbling issues in North Africa. There’s enough in the market there, I think, for investors to want to stay long from a supply point of view.”

In London, hedge funds and other money managers cut bullish bets on Brent crude by 16,735 contracts in the week ended April 10, data from ICE Futures Europe showed.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 122,339 lots, the London-based exchange said today in its weekly Commitment of Traders report. The figure represents a 12 percent decrease in speculators’ net-long positions from the previous week, according to ICE data.

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