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Oil Futures Fall; Iran Talks in Focus

Published: February 25, 2013 | 9:13 am
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Crude-oil futures were a touch lower in Asian trading Monday as data showing slower growth in China’s manufacturing activity raised concerns over global energy demand, while focus remained on Iran nuclear talks.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $93.10 a barrel at 0643 GMT, down $0.03 in the Globex electronic session. April Brent crude on London’s ICE Futures exchange was unchanged at $114.10 a barrel.

Nymex crude fell 3.4% last week in the contract’s worst weekly performance since Oct. 26 as hedge funds sold in an over-bought market and concerns emerged that the U.S. Federal Reserve’s asset buying program could end earlier than expected.

“It…looks like a healthy correction after the speculative net-long positions in both crudes had become close to being overextended,” Saxo Bank said in a note.

The bank said that with the annual refinery maintenance season coming up, demand for crude oil across the northern hemisphere looks set to fall, which could help put a cap on prices, at least for the next three months. However it added, “It is too soon to call the end of this 2013 rally.”

The focus now is on the talks over Iran’s nuclear program that the U.S., China, Russia, U.K., Germany and France will hold Tuesday for signs that international sanctions on the Middle East oil producer might be reduced. Iran has cut production to the lowest level in 30 years due to sanctions, according to the International Energy Agency.

China’s manufacturing activity showed a sharp deceleration in February, fresh data showed Monday, due to weak global demand for the country’s exports as well as the Lunar New Year holidays. Still, the data marked the fourth straight month of expansion.

Money managers cut their net long position in Nymex crude oil futures and options by 6.1% in the week ended Feb. 19, indicating speculators were less bullish about the oil price. In the same week, net long positions in ICE crude oil futures and options rose a modest 0.9%.

The WTI-Brent spread was at $20.98 per barrel at 0643 GMT, after touching $21.50 a barrel last week.

The spread has steadily widened since the end of 2011 as the U.S. has increased supply with limited possibilities for export, while rising demand from emerging markets has been reflected in higher Brent prices.

The WTI-Brent spread could widen to $22-$23 this week unless U.S. crude stocks fall significantly, said Ritterbusch and Associates oil advisory firm in a note.

Nymex reformulated gasoline blendstock for March–the benchmark gasoline contract–rose 197 points to $3.0993 a gallon, while March heating oil traded at $3.1019, 23 points lower.

ICE gasoil for March changed hands at $981.75 a metric ton, up $4.00 from Friday’s settlement.


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