Oil holds gain as Iran concerns counter bearish U.S. rigs report

By Tsuyoshi Inajima and Sharon Cho on 8/13/2018

TOKYO and SINGAPORE (Bloomberg) -- Oil held gains above $67/bbl after Iran said the OPEC nation has no intention of holding talks with the U.S. anytime soon, countering signs American shale output may increase.

Futures in New York rose as much as 0.5% after climbing 1.2% on Friday. Iran’s foreign minister said officials won’t meet with the U.S. at the United Nations General Assembly in New York in September, with sanctions on the Middle Eastern nation’s oil industry due to come into effect on Nov. 5. In America, the number of oil rigs rose to the highest in more than three years, according to data from Baker Hughes on Friday.

Oil has stayed below $70 this month as fears of a trade war between the U.S. and China weigh on prices, with neither side showing signs of backing down. While concerns about scarce oil supplies have receded after 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, U.S. output, which had surged to a record last month, has slowed in recent weeks.

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 U.S. 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 U.S. 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/bbl on the New York Mercantile Exchange and traded at $67.69 at 9:35 a.m. in Singapore. The contract climbed 82 cents to $67.63 on Friday. Total volume traded was about 42% below the 100-day average.

Brent for October settlement traded at $72.69/bbl on the London-based ICE Futures Europe exchange, down 12 cents. The contract advanced 74 cents to $72.81 on Friday. The global benchmark crude traded at a $5.77 premium to WTI for the same month.

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