A Review of the Nigerian Energy Industry

Brent dips on Iran nuclear vow

Iran's new President, Hassan Rouhani*Rouhani pledge against nuclear weapons sends crude downward

19 September 2013 – Brent oil dipped on Thursday after conciliatory comments from Iran’s president, helping unwind a risk premium and foster speculation of a recovery in oil exports to the West.

Oil fell even as other commodities and equities were boosted after the United States surprised markets by keeping its monetary stimulus programme intact.

Brent crude for November delivery fell 32 cents to $110.28 a barrel by 1230 GMT, while US crude for was up 7 cents at $107.35 and up 43 cents at $108.50 for October.

Brent and US oil rose the most in three weeks in the previous session as the US Federal Reserve’s unexpected decision to delay the wind-down of its massive monetary stimulus weakened the dollar and stoked demand for risky assets.

Early gains from oil were erased, however, after new Iranian President Hassan Rouhani vowed on Wednesday his government would never develop nuclear weapons, his strongest signal yet that he may be seeking a diplomatic thaw with the West after decades of acrimony.

Rouhani later said in a television interview that his country is not seeking war with any country, further allaying concern about tension with Israel and the West.

This unwound some of the risk premium associated with fears about a potential confrontation between Iran and the West that is built into oil prices.

“Crude oil has to trade between Fed relief and Iranian belief,” said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.

A more conciliatory tone from Iran has kindled hopes that sanctions on its oil, previously OPEC’s biggest after Saudi Arabia, will be eased, improving the global supply picture.

Elsewhere in the Middle East, easing fears of a US-led military strike on Syria also helped to dampen prices, with Western powers meeting for a second day of talks on their draft resolution on eradicating Syria’s chemical arsenal.

Low stockpiles in the United States also supported the US crude price.

Crude inventories in the US fell last week to their lowest since March 2012, data from the Energy Information Administration showed, posting a larger-than-expected drop of more than four million barrels.

Brent’s premium to US crude was heading for its lowest close in over a month and last stood at $3 compared to $9 on 2 September.

“It shows that inventory levels at the Cushing oil hub may be starting to bite,” said Seth Kleinman, head of energy research at Citigroup.

Also pointing to a tighter supply picture, Iraqi oil exports remained curbed by a pipeline leak and maintenance work, though flows were expected to resume on Thursday.

However, taking some of the pressure off, Libya’s crude production has recovered to 620,000 barrels per day, compared with its pre-war capacity of 1.6 million barrels per day, two state National Oil Corporation officials said on Wednesday.

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