Oil rises as Saudis boost pricing to Asia amid Iran uncertainty

Iranians celebrate a framework agreement on Iran’s nuclear program between their country and six world powers, in a street in Tehran, Iran, Friday, April 3

Oil rose as Iran’s nuclear accord with world powers left the timing uncertain for a possible increase in crude supplies from the OPEC member and as Saudi Arabia raised prices for shipments to Asia, its biggest regional market.
Futures climbed as much as 3.7 percent in New York and 3.6 percent in London, where trading volumes were low because of the Easter Monday holiday in much of Europe. Iran won’t affect physical oil markets before 2016 because obstacles remain to the potential lifting of sanctions and a revival in the Persian Gulf nation’s output, according to Morgan Stanley. Saudi Arabia, the world’s biggest crude exporter, narrowed the discount on its main Arab Light grade for next month’s sales to Asia.
Oil has advanced in the past three weeks amid speculation that Iran won’t be able to increase crude exports immediately and add to a global supply glut that drove oil almost 50 percent lower in 2014. Global demand is improving, Saudi Arabia’s Oil Minister Ali al-Naimi said on March 23.
“The jury is still out on Iran, but even assuming crude comes back, we don’t think it will be too dramatic, with no more than 300,000 barrels a day within the next half year,” Eugene Lindell, a senior analyst at JBC Energy GmbH in Vienna, said Monday by phone. “The bottom line is there is still a lot of crude out there, with or without an Iran deal.”
West Texas Intermediate for May delivery gained as much as $1.83 a barrel to USD50.97 in electronic trading on the New York Mercantile Exchange and was at $50.41 a barrel at 7:37 a.m. local time. The contract fell 95 cents to $49.14 on Thursday. Total volume was about 31 percent below the 100-day average. The exchange was closed April 3 for the Good Friday holiday.
Brent for May settlement climbed as much as $1.95 a barrel to $56.90, before paring gains to trade at $56.38 on the London- based ICE Futures Europe exchange. It dropped $2.15 to $54.95 a barrel on Thursday. The European benchmark crude traded at a premium of $5.88 to WTI.
A preliminary accord last Thursday with world powers signals Iran may be able to accelerate crude exports within months of a final agreement that negotiators aim to reach in June. The U.S. and European Union would lift economic sanctions if the International Atomic Energy Agency verifies Iran’s compliance with curbs on its nuclear program.
If Iran expands output by 1 million barrels a day and clears supplies held in floating storage, any “cyclical recovery” in global oil prices could be delayed by as long as one year, according to Morgan Stanley. Verification by the IAEA could take more than six months, analysts including Adam Longson said in a report on Sunday.
Iran’s oil exports have fallen by about half to about 1 million barrels a day since sanctions intensified in mid-2012. It tied Kuwait last month as the third-largest producer in the Organization of Petroleum Exporting Countries, a Bloomberg survey showed.
Saudi Arabian Oil Co. will ship Arab Light in May at 60 cents a barrel below a regional benchmark, the state-owned company known as Saudi Aramco said in an e-mailed statement on Sunday. The grade’s official selling price is up from a discount of 90 cents for April. Tehran-based National Iranian Oil Co. will probably also increase prices for May, according to a quarterly formula NIOC has used previously.
“The Saudis are raising OSPs because there seems to be some support from the demand side,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul, said by phone.
Saudi Aramco and NIOC both offered steeper discounts to customers in Asia earlier this year to compete with supplies from Latin America, Africa and Russia.
Hedge funds and other money managers boosted their net-long position on WTI by 21 percent in the seven days ended March 31, data from the U.S. Commodity Futures Trading Commission showed. That’s the biggest percentage gain since March 2011. Jake Rudnitsky and Heesu Lee, Bloomberg