Crude Drops for Second Day in New York After Iran Nuclear Talks

Oil fell for a second day after the first international talks in 15 months on Iran’s nuclear program yielded an agreement to reconvene in May.

Futures declined as much as 0.9 percent in New York after sliding 0.5 percent last week. The United Nations’ five permanent Security Council members plus Germany will meet Iranian delegates in Baghdad on May 23 after “constructive” talks in Istanbul on April 14, the European Union’s foreign policy chief said yesterday. Oil advanced this year amid concern that tension with Iran may disrupt global supplies.

“It’s definitely a step forward that the parties are at least talking again,” said Thorbjorn Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark. “There is a significant risk premium in prices related to Iran, and even small steps towards a solution can have large impacts.”

Crude for May delivery slipped as much as 97 cents to $101.86 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.24 at 9:41 a.m. London time. The contract fell 0.8 percent to $102.83 on April 13. Prices are up 3.5 percent this year.

Brent oil for June settlement dropped $1.39, or 1.2 percent, to $119.82 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s front-month premium to New York-traded West Texas Intermediate was at $17.25, compared with $19 on April 13.

Iran Talks

The discussions in Istanbul lasted 10 hours and were described as constructive by the Iran’s lead negotiator, Saeed Jalili, and the EU’s foreign policy chief, Catherine Ashton. The Islamic Republic dropped upfront demands, and the discussions focused almost exclusively on the nation’s nuclear program, according to two Western diplomats involved.

Israel’s Prime Minister Benjamin Netanyahu criticized the outcome as giving Iran more time to continue enriching uranium, the process capable of producing fuel for a nuclear bomb. Iran says it’s developing atomic technology for civilian use, including energy and medicine.

“The flavor of those talks did seem a little more positive than the rhetoric of the past,” said David Lennox, an analyst at Fat Prophets in Sydney. “Between $90 and $100 a barrel would appear to be a fair value” for West Texas Intermediate without the Iran premium, he said.

Oil also dropped as Spanish bond yields climbed to a four- month high before a debt auction tomorrow. Spanish 10-year bond yields rose 14 basis points to 6.12 percent as of 8:22 a.m. in London, the highest level since December.

New York crude has technical support along its 100-day moving average at around $101.73 a barrel today, according to data compiled by Bloomberg. Buy orders tend to be clustered near chart-support levels. Stochastic oscillators have been below a reading of 30 for the past week, signaling further losses may not be sustainable.

Bullish Bets

Hedge funds reduced bullish oil wagers by 24,860, or 11 percent, to 191,827 contracts in the seven days ended April 10, according to the Commodity Futures Trading Commission’s Commitment of Traders report on April 13.

Nigeria’s Movement for the Emancipation of the Niger Delta rebel group threatened to mount “sustained strikes on all pipelines and facilities remotely related to the Nigerian oil industry,” according to an April 14 statement.

Eni SpA suffered damage to an oil pipeline last week, for which the rebel group claimed responsibility. Nigeria is Africa’s top producer.

“There’s certainly a supply-disruption premium of around about $10 to $15 a barrel in the oil prices at the moment,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a Bloomberg Television interview. “We’ve also got bubbling issues in North Africa. There’s enough in the market there, I think, for investors to want to stay long from a supply point of view.”