Oil traded near $68 a barrel after Iran ruling out talks with the US heightened concerns over global supply, countering fears of wider market turmoil from a crisis in Turkey.
Futures in New York were little changed after climbing 1.2 per cent on Friday. Iran’s foreign minister said the OPEC nation won’t meet with the US at the United Nations General Assembly in New York in September, with sanctions on the Middle Eastern nation’s oil industry set to be implemented on Nov. 5. Global risk assets declined as investors grew nervous of contagion from financial strife in Turkey after the lira extended its precipitous slide.
Global production has been a focal point in the oil market in recent months as investors weigh the outlook for supply declines against OPEC’s decision in June to ease curbs on its output. Prices have been suppressed below $70 this month as fears of a trade war between the US and China temper gains, with neither side showing signs of backing down.
While uneasiness about scarce oil supplies have cooled somewhat after OPEC-member Saudi Arabia and other producers pumped more, the International Energy Agency warned that renewed American sanctions on Iran and disruptions elsewhere could be challenging. Meanwhile, US output, which had surged to a record last month, has slowed in recent weeks, while the number of oil rigs rose to the highest in more than three years.
The Iran sanctions concerns will be “price supportive” in the short term, Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone. Despite the US rig count being at a high for this year, the “production level has stalled and that raises questions on whether or not there’s capacity for the US to increase production further, which is why we’re seeing firmer markets.”
West Texas Intermediate crude for September delivery rose as much as 32 cents to $67.95 a barrel on the New York Mercantile Exchange and traded at $67.64 at 1:18 p.m. in Singapore. The contract climbed 82 cents to $67.63 on Friday. Total volume traded was about 36 per cent below the 100-day average.
Brent for October settlement traded at $72.65 a barrel on the London-based ICE Futures Europe exchange, down 16 cents. The contract advanced 74 cents to $72.81 on Friday. The global benchmark crude traded at a $5.76 premium to WTI for the same month.
Futures for September delivery increased 1.3 per cent to 519.3 yuan a barrel on the Shanghai International Energy Exchange. The contract lost 1.2 per cent on Friday and was little changed last week.
While President Donald Trump had said he would negotiate with Iran “without pre-conditions,” Iran’s Foreign Minister Mohammad Javad Zarif told the semi-official Tasnim news agency that “no meetings will take place” with America during the UN event next month. The Trump administration was said to forecast a 50-per cent cut, or as much as 1 million barrels a day, in Iranian oil sales when it reimposes sanctions in November.
In America, the number of working rigs targeting oil rose by 10 to 869 last week, rising to the highest level since March 2015, Baker Hughes data showed. Producers have announced billions of dollars in new investments in the Permian and elsewhere lately as they chase oil prices near three-year highs.
With more US Sanctions looming, anxiety over the developments in Turkey have been weighing on markets. Asian shares slid, US equity futures dropped, and Treasuries and the yen advanced after the lira’s selloff spread to other emerging market currencies. The Turkish currency has been a casualty of a deepening crisis spurred by the administration’s growth-at-all-costs agenda and a worsening spat with the US, which sanctioned Turkey over the detention of an American priest.