By Georgi Kantchev
LONDON--Oil prices started the week in the red ahead of the
looming deadline for Iran's nuclear talks, while supply disruptions
due to Saudi airstrikes on Yemen looked increasingly unlikely.
Brent crude for May delivery fell 0.7% to $56 a barrel on
London's ICE Futures exchange. On the New York Mercantile Exchange,
light, sweet crude futures for delivery in May traded at $48.16 a
barrel, down 1.5% from Friday's settlement.
The oil market awaited the outcome of a Tuesday deadline for
talks between Iran and six world powers over its nuclear program. A
possible relaxation of the sanctions against the country could pave
the way for increased Iranian oil exports.
"If a framework agreement is reached, we would expect an
immediate bearish knee-jerk reaction in the markets, with oil
prices quickly losing on the order of $5," Société Générale said in
a report. But the bank cautioned that sanctions could only be
lifted after a final agreement which could be signed at the end of
June.
"Only then...would Iran start to gradually ramp up production
and exports," the bank said. "The bottom line is that, aside from
market psychology, we believe that Iranian crude will not become a
major issue for the oil markets, from a fundamental perspective,
until late 2015 or, more likely, 2016."
Iran currently exports around 1 million barrels of oil a day,
but has been producing in excess of 3 million barrels a day at
various times over the past year and storing this in tankers and
onshore facilities, ANZ Research said. Iran may have a stockpile of
over 30 million barrels, it said.
Prices had surged last week after Saudi Arabia and its allies
launched airstrikes against Iran-linked Houthi militants in Yemen.
But the threat of a potential disruption to oil supplies due to the
conflict now looks increasingly remote, with the fighting taking
place far from areas where oil tankers pass through.
"The conflict in Yemen poses no threat to Saudi production,
Yemeni production is small and unimportant, and the risk of a
disruption to oil shipments...is considered low, due to a strong
presence of well-trained U.S., NATO, and other allied naval
forces," Société Générale said.
Nymex reformulated gasoline blendstock for April--the benchmark
gasoline contract--fell 0.8% to $1.7865 a gallon, while ICE gasoil
for April changed hands at $530.75 a metric ton, down $10.25 from
Friday's settlement.
Biman Mukherji contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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