Oil dropped to a three-month low in New York on the prospect that increasing Iranian shipments will extend the global supply glut.
West Texas Intermediate crude extended losses in the wake of a third weekly retreat. Iran will focus on regaining oil sales it lost due to sanctions regardless of the impact on prices, Oil Minister Bijan Namdar Zanganeh said in Tehran Monday. The United Nations Security Council unanimously adopted a resolution endorsing an agreement placing curbs on Iran’s nuclear program in return for lifting sanctions.
Crude’s recovery from a six-year low earlier this year has faltered as leading members of the Organization of Petroleum Exporting Countries pump at record levels to defend market share. Iran may restore production halted by sanctions faster than anyone anticipates if the history of previous shutdowns is any guide, according to data compiled by Bloomberg. The number of drilling rigs targeting oil in the U.S. fell to 638, Baker Hughes Inc. said Friday.
“There continues to be a lot of talk about Iran and it’s all bearish for the market,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “There’s not a lot for the bulls to latch on to at the moment.”
West Texas Intermediate for August delivery, which expires Tuesday, slipped 81 cents, or 1.6 percent, to $50.08 a barrel at 1:23 p.m. on the New York Mercantile Exchange. It touched $50.02, the lowest since April 6. The more-active September contract dropped 79 cents to $50.42. Total volume was 28 percent below the 100-day average for the time of day.
Brent for September settlement fell 38 cents, or 0.7 percent, to $56.72 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $6.30 premium to September WTI.
Iran wants to pump almost 4 million barrels a day within seven months once sanctions are removed and 4.7 million as soon as possible after that, Oil Minister Zanganeh said Monday at a press conference in Tehran.
Under the nuclear agreement reached in Vienna last week between Iran and six world powers, the U.S. agreed to end efforts to limit Iran’s oil sales. Iran had the second-biggest output in OPEC before the European Union banned purchases of its crude in July 2012.
Iran, currently OPEC’s fourth-biggest member, won’t achieve an export boost of more than 500,000 barrels a day, or about 50 percent, until next year, according to banks including Goldman Sachs Group Inc. In the past, assessments for supply disruptions at OPEC members Libya and Venezuela were confounded by quicker- than-expected recoveries, data compiled by Bloomberg shows.
“Once Iran increases output, $50 could easily become the ceiling for WTI,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone.
The U.S. weekly rig count, which has declined about 60 percent since December, dropped for the first time in three weeks as of July 17, according to Baker Hughes.
U.S. crude inventories remain almost 100 million barrels above the five-year average for this time of the year, data from the Energy Information Administration shows.
Speculators cut bullish bets on WTI to the lowest level since March on the prospect for increased supply. Money managers reduced their net-long position in the oil by 15 percent in the week ended July 14, U.S. Commodity Futures Trading Commission data show. Conversely, funds raised their bullish stance on Brent in the same period by the most since April, according to data from ICE on Monday.
Written by Mark Shenk of Bloomberg