Crude nears $70 as traders eye Iran deadline

American officials already are positioning for post-Iran accord negotiations

Oil futures in New York zeroed in on $70 (Dh257) a barrel as traders brace for a re-imposition of US sanctions on Iran.

Prices jumped 1.9 per cent on Friday to close at the highest level since November 2014. Even though US President Donald Trump has yet to announce whether he’ll pull out of the 2015 Iranian nuclear deal as a May 12 deadline nears, American officials already are positioning for post-accord negotiations.

New sanctions could disrupt crude exports from Opec’s third-largest producer. A rally in equities also pulled oil higher.

“It’s a psychological level,” said Michael Wittner, the head of commodities research at Societe Generale in New York. “Geopolitics has been a very key driver in the market and it’s continuing.”

Crude has rallied about 15 per cent so far this year as Organisation of Petroleum Exporting Countries (Opec) and allied producers crimp a global glut and geopolitical risks multiplied in the Mideast region that’s home to almost half the world’s oil.

Weighing possibilities

“The market might be weighing the possibility of Trump not extending, which doesn’t change supply-demand balances by itself,” said Michael Loewen, a commodities strategist at Scotiabank in Toronto. “But if new sanctions are created and the US pressures EU nations to follow suit, then the market could be looking much different in a few short months.”

West Texas Intermediate crude for June delivery advanced $1.29 to settle at $69.72 a barrel on the New York Mercantile Exchange, after trading just 3 cents below the $70 mark. Total volume traded was about 1 per cent below the 100-day average. Prices are up 2.4 per cent this week.

Brent crude for July settlement climbed $1.25 to end the session at $74.87 on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $5.29 premium to July WTI.

“It’s back to what’s been haunting the market and is going to continue as we move a day closer to May 12,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. “The geopolitical jitters are just infecting the market.”

In the US, record crude production has been a headwind on the price rally. A dearth of pipeline capacity in the biggest American oilfield — Permian Basin of West Texas and New Mexico — has crushed local prices: some grades of West Texas crude are selling for almost $14 a barrel less than the US benchmark, the steepest discount since July 2014.