Oil Trades Near Two-Day Low on Iran Deal, Rising Supplies

Oil declined for a second day in New York after Iran agreed to grant access to United Nations nuclear inspectors and the euro slumped to a 21-month low against the dollar.

West Texas Intermediate slid as much as 1.2 percent. UN inspectors and Iran broke a five-year stalemate with a deal that gives the International Atomic Energy Agency access to the nation’s Parchin military complex, IAEA Director General Yukiya Amano said yesterday. Western governments are holding talks with Iran today in Baghdad. The euro fell on speculation European leaders won’t propose new measures today in Brussels to stem the region’s debt crisis.

“For now the geopolitical premium is likely to remain depressed, and today’s meeting will set the tone for future relations between Iran and the West,” said Andrey Kryuchenkov, an analyst at VTB Capital in London, who predicts further price losses will be limited.

Crude for July delivery declined as much as $1.14 to $90.71 a barrel in electronic trading on the New York Mercantile Exchange. It was at $91.14 at 12:55 p.m. London time. The contract slid 1.1 percent to $91.85 yesterday, the lowest close since May 18. The June futures contract, which expired, fell 91 cents yesterday to $91.66. Front-month prices are 7.9 percent lower this year.

Brent oil for July settlement dropped $1.17, or 1.1 percent, to $107.24 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $16.10, from $16.56 yesterday.

Euro’s Decline

The euro extended a decline against the dollar to its weakest since August 2010. The 17-member currency dropped as much as 0.5 percent to $1.2615. It traded at $1.267 as of 12:57 a.m. London time.

Oil advanced 6.1 percent in the first four months of this year on concern that sanctions against Iran, the second-biggest crude producer in the Organization of Petroleum Exporting Countries, may disrupt supplies.

Iran is suspected by the U.S. and its allies to have worked on the trigger for an atomic bomb at Parchin. The nation is in talks in Baghdad today about its nuclear program with the U.S., U.K., France, Russia, China and Germany. The sides failed to produce an accord at their last gathering on April 14 in Istanbul, where they described discussions as “constructive.”

Baghdad Talks

The so-called P5+1 powers won’t give Iran relief from oil and financial sanctions at their meeting in the Iraqi capital, said U.S. officials. They will offer confidence-building measures in return for Iranian concessions, according to a Western official, who spoke on condition of anonymity.

Michael Mann, a spokesman for the European Union delegation, told Iran’s state-run Press TV in Baghdad that the mood of the talks was “positive,” though he added a “final deal” wasn’t expected today.

“The agreement by Iran to let the inspectors in is a small step in potentially reducing the supply risk,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “That feeds into the overall situation where demand is steady to somewhat soft against a background of more than adequate supplies.”

U.S. crude inventories rose 1.5 million barrels last week, the American Petroleum Institute said. A government report today may show a gain of 1.7 million.

Oklahoma Crude

Crude stockpiles at Cushing, Oklahoma, the delivery point for futures traded on the New York Mercantile Exchange, rose 491,000 barrels to 47.4 million last week, the API data showed. That’s the highest level in records dating back to 2004.

Gasoline inventories dropped 4.5 million barrels, according the API. An Energy Department report today may show they declined 650,000 barrels, according to the median estimate of 12 analysts in a Bloomberg survey.

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.

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

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