Brent Crude Rises as Kerry Tempers Expectations on Iran

Brent crude rose for the first time in four days as U.S. Secretary of State John Kerry tempered expectations of a possible deal over Iran’s nuclear work.

The European benchmark gained 1.6 percent after Kerry said that there are “some important gaps” in reaching an accord that would ease sanctions against Iran’s oil exports in exchange for concessions on its nuclear work. He spoke in Geneva during an unscheduled stop for the talks. West Texas Intermediate advanced less than Brent as better-than-expected jobs data fueled worry that the Federal Reserve will scale back stimulus.

“It’s not clear if the Iranians can deliver enough for the West to reduce sanctions,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “Kerry added a dose of reality to expectations that probably have gotten ahead of themselves. The market is reacting to that reality.”

Brent for December settlement gained $1.66 to end the session at $105.12 on the London-based ICE Futures Europe exchange. The volume of all futures was 44 percent above the 100-day average at 2:52 p.m. in New York. Prices dropped 0.8 percent this week.

WTI for December delivery rose 40 cents, or 0.4 percent, to settle at $94.60 a barrel on the New York Mercantile Exchange. The volume was 39 percent lower than the 100-day average. Prices slipped 1 cent this week, a fifth consecutive decline. They reached at $93.37 on Nov. 5, the lowest close since June 4.

WTI-Brent

Brent was at a premium of $10.52 to WTI. The spread was $9.26 yesterday, the narrowest closing level since Oct. 25.

There is “not an agreement at this point in time,” Kerry said. “We hope to try to narrow those differences but I don’t think anybody should mistake that there are some important gaps that have to be closed.”

Kerry joined counterparts from France, Germany and the U.K., who also arrived today in Geneva. During two days of talks the Swiss city, the world powers have edged closer to an accord over Iran’s disputed nuclear program. While all the details have yet to be worked out, a framework has been agreed upon, Iranian Foreign Minister Mohammad Javad Zarif said yesterday in an interview.

International sanctions have hindered Iran’s ability to export oil. The Islamic republic, the Organization of Petroleum Exporting Countries’ second-biggest producer in June 2012, was in sixth place last month, according to a Bloomberg survey of companies.

Geneva Talks

The embargo has cost the country about $100 billion in foreign investment and oil revenue, a report by the Carnegie Endowment for International Peace estimated in April.

“If they sign something in Geneva, that would be pretty bearish for oil,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

The possible easing of tension came as OPEC predicted a decline in need for its own crude amid rising production from in North America.

Demand from the group, which produces about 40 percent of the world’s oil, will fall by 1.1 million barrels a day to 29.2 million barrels a day between 2013 and 2018, OPEC said yesterday in its annual World Oil Outlook.

U.S. supplies of crude oil increased 1.58 million barrels to 385.4 million in the week ended Nov. 1, the most since June 21, the Energy Information Administration reported on Nov. 6. Output rose to 7.896 million barrels a day in the week ended Oct. 18, the most since March 1989, according to the EIA, the Energy Department’s statistical arm.

U.S. Payrolls

Employers added 204,000 workers in October, the Labor Department reported, higher than the 120,000 gain forecast by economists in a Bloomberg survey. The data came as the Fed considers when to dial back $85 billion in monthly bond purchases.

The Fed said last month that it needs more evidence of better economic growth before it can reduce bond purchases. The central bank left unchanged its statement that it probably will hold its target interest rate near zero “at least as long as” unemployment exceeds 6.5 percent.

The dollar strengthened as much as 0.8 percent to $1.3318 per euro on speculation the Fed will reduce stimulus. A stronger dollar diminishes crude’s investment appeal.

Economic Sign

“The jobs report is a good economic sign,” said Chris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Most signals are pointing to the economy improving and it’s good for oil demand. But it’s also making the Fed more likely to cut back.”

Implied volatility for at-the-money WTI options expiring in January was 17.7 percent, down from 19.2 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 398,491 contracts as of 2:36 p.m. It totaled 553,399 contracts yesterday, 4.6 percent below the three-month average. Open interest was 1.73 million contracts.

Source: Bloomberg