(For Bloomberg fair value curves, see CFVL <GO>.)
Sept. 26 (Bloomberg) -- West Texas Intermediate crude rebounded from the lowest level in 12 weeks. Iran’s diplomatic efforts to end international sanctions may have only a limited impact on oil prices, Bank of America said.
Futures rose after sliding 0.5 percent yesterday following a government report that showed an unexpected increase in U.S. crude stockpiles. Iranian President Hassan Rouhani’s trip to the United Nations in New York this week raised hope for renewed talks on its nuclear program and sanctions, though no official meetings have been scheduled between U.S. President Barack Obama and Rouhani.
“The political risk premium has largely been withdrawn from the market over the past couple of weeks,” said Abhishek Deshpande, an oil market analyst at Natixis SA in London. “But with the situation in Egypt, Syria and Iran still far from resolved, the market may have gotten a little ahead of itself in pushing prices lower.”
WTI for November delivery was up 42 cents at $103.08 a barrel on the New York Mercantile Exchange as of 1:51 p.m. London time, after falling by 46 cents earlier today. WTI settled yesterday at the lowest close since July 3. The volume of all futures traded was 42 percent below the 100-day average. Prices are up 5.2 percent this quarter and 12 percent higher in 2013.
Brent for November settlement rose 67 cents to $108.99 a barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a $5.90 premium to WTI, widening from $5.66 yesterday, which was the biggest since Sept. 5.
Crude inventories climbed for the first time in four weeks, gaining 2.64 million barrels, according to data from the Energy Information Administration. Analysts polled by Bloomberg had forecast a 1 million-barrel decrease.
The stockpile rebounded to 358.3 million barrels from 355.6 million the prior week, which was the lowest since March 2012, the Energy Department’s statistical arm said. Total petroleum demand fell 2.8 percent to 19.3 million barrels a day, and refineries reduced their utilization rate to 90.3 percent, the lowest level since Aug. 9.
While crude stockpiles rose nationwide, the inventory tally at Cushing, Oklahoma, slipped 412,000 barrels to 32.8 million on Sept. 20, the lowest since February 2012, the report showed. Supplies at the delivery point for WTI have tumbled 34 percent since June 28 and dropped for 12 weeks in a row.
Rouhani, elected on a pledge to ease Iran’s global isolation, has used this week’s trip to the UN to emphasize his differences from his predecessor Mahmoud Ahmadinejad and prepare the ground for renewed talks on the nation’s nuclear program.
The new president said in his address to the General Assembly on Sept. 24 that Iran is ready to engage in “result- oriented” talks on the nuclear program while offering no concessions. He called Iran’s goals peaceful and said nuclear weapons have no place in his country’s doctrine.
A “new approach” to negotiations will start today with foreign ministers from the U.S. and Iran meet in New York, said Abbas Araghchi, a deputy foreign minister and member of nuclear negotiating team, according to state-run Mehr news agency.
There’s a “new determination” among officials from Iran, U.S., U.K., France, Russia, China and Germany, Araghchi said. Iran wants an agreement on framework and identification of the goal, followed by mutual steps to achieve it, he said.
U.S. Secretary of State John Kerry will meet Iranian Foreign Minister Javad Zarif today in the highest-level formal talks between the two nations in over three decades, joined by counterparts from the other five powers and the European Union’s foreign policy chief Catherine Ashton.
“It’s a gradual process over that period, but Rouhani does sound like he is sincere,” said Bjarne Schieldrop, chief commodity analyst at SEB AB in Oslo.
Even with diplomatic progress, a return of Iranian oil is only a “moderate” risk to the oil market, BofA Merrill Lynch said in an e-mailed report dated yesterday. Rouhani’s “diplomatic push to end the embargo, if and when that happens, may end up having less than a $10 a barrel impact on oil prices,” BofA’s head of global commodity research Francisco Blanch said in the report.
WTI rose to a two-year high on Aug. 28 amid concern that a U.S.-led assault against Syria would lead to a disruption of Middle East oil exports. The region accounted for 35 percent of global oil output in the first quarter of this year, according to the International Energy Agency.
The U.S. and Russia reached a framework deal on Sept. 14 that averted a military strike to punish Syria for what the U.S. says was an Aug. 21 chemical weapons attack by government forces that killed more than 1,400 people.
The UN Security Council’s five permanent members have agreed on the most important elements of a draft resolution requiring Syria to surrender its chemical weapons, according to a UN diplomat. A vote on adopting the resolution may take place as soon as this week, said the diplomat, who asked not to be identified because the negotiations are confidential.
Libya’s Zawiya port exported its first crude cargo this month on Sept. 24, after flows were restored from oil fields that supply the terminal, an official at the local refinery said yesterday. Several other ports, including the largest, Es Sider, remained shut.
--With assistance from Ann Koh in Singapore and Mariam Sami and Saleh Sarrar in Tripoli. Editors: Bruce Stanley, Steve Voss