WTI Crude Rises as Brent Premium Narrows to 9-Month Low
West Texas Intermediate crude rose amid clashes in Nigeria after talks between Iran and world powers ended without agreement. Brent oil’s premium to New York futures narrowed to the smallest level since June.
Prices gained 0.7 percent after tumbling 4.7 percent in the five days ended April 5, the biggest one-week decline since September. The main rebel group in Nigeria, Africa’s largest crude-producing country, said it killed 15 security guards in an attack in the oil-producing Bayelsa state. Iran and six world powers didn’t reach an interim deal over the country’s nuclear work, which may bolster calls for more sanctions on the nation.
“There have been some issues in Nigeria, which is always worrying,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “The fact that the Iran talks went nowhere isn’t helpful. The Iran saga continues to drag on, which is probably what the Iranians want.”
WTI crude oil for May delivery advanced 66 cents to settle at $93.36 a barrel on the New York Mercantile Exchange. The volume of all WTI futures traded was 10 percent below the 100- day average for the time of day at 3:10 p.m.
Brent oil for May settlement gained 54 cents, or 0.5 percent, to $104.66 a barrel on the London-based ICE Futures Europe exchange. The contract touched $103.40, the lowest intraday price since July 25. The volume of all Brent futures was 52 percent higher than the 100-day average.
The European benchmark grade ended the session at a $11.30 premium to WTI, the narrowest gap since June 22 on a closing basis.
Norwegian unions and employers reached an agreement in collective bargaining talks that extended beyond a midnight deadline, averting a strike that would have started today and curbed offshore oil production for the second time in less than a year. Norway is the biggest producer of oil in the North Sea.
Brent for May settlement traded at a discount of 11 cents to the June contract, a situation known as a contango market, where prompt supplies cost less than those for later delivery. Front-month prices fell below second-month prices for the first time since June 2012 on April 5. Contango usually signals either falling demand or rising supply, or a combination of both.
Oil in New York has technical support along its 100-day moving average, about $92.14 a barrel today, according to data compiled by Bloomberg. Futures halted an intraday decline near that indicator for a second day on April 5. Buy orders tend to be clustered close to chart-support levels.
Nigerian troops are hunting for militants who said they killed the 15 policemen. The attack on April 6 was claimed by the Movement for the Emancipation of the Niger Delta. Two insurgents also died in the gunfight, which lasted for more than 40 minutes at a river in the Azuzama area in Southern Ijaw local government region, MEND spokesman Jomo Gbomo said in an e-mailed statement yesterday.
MEND said on April 3 it would resume attacks in the country after its suspected leader, Henry Okah, was sentenced to 24 years in prison in South Africa on terrorism charges. Okah denies being a leader of the group.
Attacks including kidnappings and bombings of installations by groups such as MEND reduced Nigeria’s oil output by more than 28 percent between 2006 and 2009, according to Bloomberg data.
There was “enough substance” in Iran’s negotiations with the U.S., Britain, France, China, Russia and Germany for them to continue, a Western diplomat who spoke to reporters on condition of anonymity said today in Brussels. The two days of talks in Almaty, Kazakhstan, ended April 6. Iran is the fifth-biggest producer in the Organization of Petroleum Exporting Countries and is under sanctions because of its nuclear program.
The Islamic republic wants a clear pledge that its right to enrich uranium, which can be used to build nuclear bombs, won’t be compromised if it suspends some production. Western powers are pushing Iran to take confidence-building steps, such as halting enrichment.
“Geopolitics are back at work,” said John Kilduff, a partner at Again Capital LLC, a New York-based energy hedge fund. “The upsurge in unrest in Nigeria and the breakdown of talks with Iran are both pushing the market higher.”
Implied volatility for at-the-money WTI crude options expiring in May was 20 percent, up from 19.8 percent April 5. The figure has slipped from 24.7 percent on Feb. 21.
Electronic trading volume on the Nymex was 403,078 contracts as of 3:10 p.m. It totaled 662,698 contracts April 5, 15 percent above the three-month average. Open interest was 1.76 million contracts.
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