Crude-oil futures fell on Wednesday as rising hopes of a deal between Iran and the International Atomic Energy Agency eased global supply concerns and the prospects for a Greek euro exit fuelled expectations for weaker oil demand.
Traders also eagerly awaited the latest U.S. government data on last week’s petroleum inventories, with analysts expecting to see a rise in crude supplies, along with declines in gasoline and distillate stocks.
At last check, crude for July delivery fell 63 cents, or 0.7%, to $91.22 a barrel on the New York Mercantile Exchange. On Tuesday, the June crude contract, which expired at the end of that session, lost 1.1%.
Turkey and Poland dazzled observers with their economic performance following the global credit crunch, but remain vulnerable to euro-zone crisis.
Prices came under pressure as six world powers initiated talks with Tehran to discuss the future of the Iranian nuclear program. Iran has so far showed willingness to allow United Nations inspectors to start probes into suspicions that the country secretly has developed atomic weapons, according to media reports.
“If there were to be further rapprochement between the conflicting parties, or indeed if the prospect of an easing of sanctions were to be raised, the risk premium would be likely to fall further, bringing oil prices down accordingly,” analysts at Commerzbank said in a note.
Phil Flynn, a vice president at PFG Best, said that the nuclear program showdown has already “done long-term damage” to the energy industry.
As it became clear to European and Asian customers of Iranian crude that they would have to replace that crude, they found that Libyan and Iraqi crude oil “works just as well,” he said in an emailed note.
Greece’s former Prime Minister Lucas Papademos told the Journal that, “it cannot be excluded that preparations are being made to contain the potential consequences of a Greek euro exit.” Costas Paris, who conducted the interview, reports. Photo: Reuters
Turmoil and uncertainty about Greece’s future in the euro zone also added downward pressure to oil prices.
Former Greek Prime Minister Lucas Papademos told Dow Jones Newswires late Tuesday that a Greek exit from the euro would be “catastrophic” for Greece, but that preparations were being considered for an exit of the shared currency.
He later clarified in an interview with CNBC that he wasn’t aware of any specific preparations under way in Greece or elsewhere in Europe.
“There are several ways for Greece to go, including remaining in the euro zone, with all the benefits of trade and travel, while having their very own pegged currency, albeit devalued,” said Michael Fitzpatrick, editor in chief of the Kilduff Report. “A calamitous ‘GreExit’ is a fascinating narrative, but not likely to occur.”
Meanwhile, a firmer dollar further spurred a downward trend for crude oil. The ICE dollar index, which tracks the greenback against a basket of six major currencies, rose 0.3% to 81.746. A stronger dollar tends to add pressure on commodities traded in the U.S. currency as they get more expensive for holders of other currencies.
Other energy futures followed oil prices south. Gasoline for June delivery shed 1 cent, or 0.5%, to $2.92 a gallon, while June natural gas gave up 2 cents, or 0.7%, to $2.84 per million British thermal units.
Late Tuesday, the American Petroleum Institute reported that crude-oil supplies rose 1.5 million in the week ended May 18. It also reported gasoline inventories down 4.5 million barrels, and inventories of distillates down 235,000 barrels.
The report comes ahead of the more closely watched official numbers from the Energy Information Administration, due shortly.
Analysts polled by Platts forecast inventories of crude up 750,000 barrels, and gasoline stocks down 200,000 barrels. Supplies of distillates, which include heating oil, are seen down 350,000 barrels.
