AFP/Getty Images
Oil futures traded slightly lower Friday on supply worries, but traders said downside remained limited on expectations the U.S. will abandon the Iran nuclear deal, leading the way for renewed sanctions on Tehran.
June West Texas Intermediate crude was off by a penny at $68.18 a barrel on the New York Mercantile Exchange, following Wednesday’s 0.5% climb. Global benchmark June Brent was flat at $73.88 a barrel on ICE Futures Europe.
Sanctions on Iran were relaxed in January 2016 as part of an international agreement to curb the country’s nuclear program. Iran now exports around 2.5 million barrels a day of crude oil, said Robert Yawger, director of oil futures at Mizuho. If the U.S. abandons the agreement and renews sanctions, Iran’s are expected to fall by 350,000 to 500,000 barrels a day.
The prospect of the U.S. abandoning the nuclear deal is among several factors cited for a rally that’s lifted the U.S. benchmark from a 2018 low just below $60 a barrel in mid-February to a nearly 3 1/2 year high shy of $70 a barrel this month. Strong global demand and efforts by the Organization of the Petroleum Exporting Countries, or OPEC, to limit production have also played a role, offsetting growing output by U.S. shale producers.
The price of Brent earlier this week breached the symbolic $75-a-barrel threshold for the first time since late 2014.
“The market is still dominated by the question of whether U.S. President Trump will revoke the nuclear agreement with Iran in mid-May and impose new sanctions against Iran,” according to analysts at Commerzbank. “The oil price should not fall in any significant way until the question of renewed Iran sanctions has been resolved,” the analysts wrote in a daily note Friday.
German Chancellor Angela Merkel is due in Washington on Friday, where she is expected to urge Trump to stick to the Iran agreement. French President Emmanuel Macron brought a similar message to the White House earlier this week, with apparently limited success.
Traders are also looking ahead to weekly U.S. oil rig data out Friday from Baker Hughes, a key metric for activity in the sector.
Among other energy contracts, June gasoline rose 0.55 cent, or 0.3%, to $2.1221 a gallon, while June heating oil fell 0.44 cent, or 0.2%, to $2.1372 a gallon. June natural-gas futures fell 6 cents to $2.779, a decline of 2.1%.