Oil Surges as Iran Nuclear Talks Advance

Oil Surges as Iran  Nuclear Talks AdvanceOil Surges as Iran  Nuclear Talks Advance

Oil rose for a second day on signs Iran and world powers will miss another deadline for a nuclear deal that could end sanctions on the OPEC producer.

Futures gained as much as 1.9% in New York, after climbing the most Thursday in more than two weeks. Senior officials involved in the negotiations said it was too late to reach an agreement by Friday morning in Vienna, the last chance to qualify for a 30-day review in the US Congress. A measure of crude trading volatility was near the highest level in 12 weeks.

Oil’s advance is paring a second weekly loss driven by China’s equities rout and the turmoil in Greece. Iran, the fourth-largest producer in OPEC, plans to boost crude exports and recapture market share, should international sanctions be lifted, Buniness World Online reported.

“If there is a deal, that puts more supply into the market. Oil will probably trade sideways until the dust settles. Moreover, I think we will spend more time around this level,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney said.

West Texas Intermediate for August delivery increased as much as 98 cents to $53.76 a barrel in electronic trading on the New York Mercantile Exchange and was at $53.65 at 2:08 p.m. Singapore time. The contract rose $1.13 to $52.78 on Thursday. Total volume was 33% above the 100-day average. Prices have fallen 5.7% this week.

  Nuclear Deal

Talks on Iran’s nuclear program were deadlocked as interlocutors from the Islamic Republic argued over persistent differences. Should the deadline be missed, any future agreement will be subject to 60 days of scrutiny.

Iran’s plan to boost exports by 50% would require an extra 500,000 barrels a day of production, Goldman Sachs Group Inc., Bank of America Corp. and Societe Generale SA said last week.

"The impact of Iranian oil expected to come onto the world markets after it signs the agreement on its nuclear program is still difficult to forecast, as there are too many other global factors," said Russian Finance Minister Anton Siluanov.

"Injecting new oil into world markets certainly could impact prices. But the price depends on the global economy at large."

Siluanov said such macroeconomic factors like big crude consumers’ feelings also have their impact on the price.  

“The oil price undoubtedly is formed due to market demand and supply and today we see that the instability of financial markets in China has already influenced the price,” he said. “If there is enough demand, the impact will be minimal.”

A further fall in oil prices would result in a recession in US shale; it would not be cost-effective to invest in shale, that is how the market self-regulates, according to Siluanov.

“We’ll be analyzing the situation, Russia has enough reserves and will not suffer much from an oil price decline while it has already had such an experience two years ago,” Siluanov said, adding he does not think such a situation could happen again.

Oil prices almost halved in the last six months of 2014, with Brent crude diving below $45 for the first time since 2009. However, crude prices have rallied strongly to around $60 per barrel since the beginning of 2015.