Oil Holds Losses in London as Iran Supply Seen Exacerbating Glut

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Offshore Oil And Gas Operations On The Cromarty Firth Ahead Of The Scottish Referendum
Offshore drilling rigs and platforms, including Prospector 1, operated by Prospector Offshore Drilling SA, right, stand anchored in the Cromarty Firth as a fisherman fishes from the quayside in Cromarty, U.K., on Tuesday, Aug. 5, 2014. Oil and gas extraction from the North Sea, a pillar of the Scottish economy, is a bone of contention in the debate on independence for Scotland that will culminate in a referendum on Sept. 18. Photographer: Simon Dawson/Bloomberg

Oil held losses after the first decline in four days as investors weighed the prospects of Iran increasing crude exports in an oversupplied market.

Futures were little changed in London after falling 1.9 percent on Friday. Iranian lawmakers approved the outlines of a bill that would ban inspections of military sites and require the lifting of all international sanctions under any deal, state-run Mehr news agency reported. Hedge funds reduced both bullish and bearish bets on crude for a fourth week, according to U.S. Commodity Futures Trading Commission data.

Oil’s rebound from a six-year low has faltered amid speculation the 35 percent price advance since January is spurring global supply. Iran, OPEC’s fifth-largest producer, has estimated it could double exports within six months of penalties being lifted as a June 30 deadline approaches for an accord with world powers.

“If sanctions are lifted, that will be another source of supply and potentially weigh on the downside for oil prices,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “The market will be watching the Iranian situation to see what ripples out of those talks.”

Brent for August settlement was at $63.20 a barrel on the London-based ICE Futures Europe exchange, up 18 cents, at 2:32 p.m. Singapore time. The contract dropped $1.24 to close at $63.02 on Friday. The European benchmark crude traded at a premium of $3.13 to West Texas Intermediate, the U.S. marker, for the same month.

Iran Supply

WTI for July delivery, which expires Monday, was 18 cents higher at $59.79 a barrel. The more-active August contract was up 10 cents at $60.07.

The vote by Iranian lawmakers, while preliminary, may complicate talks as diplomats from the U.S., U.K., France, Germany, Russia and China converge in Vienna to reach a final agreement. The U.S. won’t agree to a deal without securing access to fully evaluate Iran’s nuclear program, a State Department official said Sunday on condition of anonymity.

Iran is allowed to export about 1 million barrels a day of oil under sanctions. Oil Minister Bijan Namdar Zanganeh presented a letter to the Organization of Petroleum Exporting Countries before a June 5 summit, urging the group to make way for his country to pump 4 million a day, back to 2008 levels before Western penalties intensified.

OPEC Output

OPEC, whose 12 members supply about 40 percent of the world’s oil, maintained its output quota at 30 million barrels a day at the meeting. Saudi Arabia, Iraq and United Arab Emirates, the group’s biggest producers, each pumped at a record in May, according to the International Energy Agency.

Money managers cut their short wagers on WTI by 4.3 percent and trimmed long bets by 0.2 percent, CFTC data for the week ended June 16 showed. Separately, the Chicago Board Options Exchange Crude Oil Volatility Index closed at 30.4 on Friday, the lowest level in five weeks.

Drillers seeking oil in the U.S. idled rigs for a 28th week, prolonging a record slump. The number of active machines decreased by four to 631, the fewest since August 2010, according to data from Baker Hughes Inc., an oilfield-services company.

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