Oil rebounds on signs of stronger demand and latest Iran news, ignoring...

Oil rebounds on signs of stronger demand and latest Iran news, ignoring EIA data

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U.S. oil futures finished higher on Wednesday and benchmark Brent trimmed declines in early trading as OPEC member Iran stressed that it opposed President Barack Obama’s demand to put on hold its nuclear activities for at least 10 years, news that helped crude rebound from an early slide tied to a spike in U.S. weekly crude supplies.

Some drew encouragement from Saudi oil minister’s comments that prices are expected to recover soon from the selloff of recent months. Also likely adding to the upbeat market sentiment, the Federal Reserve’s Beige Book report predicts reductions in capital expenditure for oil and gas producers in certain U.S. districts. Lower oil exploration budgets will bring less supply in the future.

Oil prices were moving down in early trade after U.S. Energy Information Administration reported that crude stocks rose 10.3 million barrels last week. Analysts were expecting crude inventories to show a rise of 3.7 million barrels. That marks the eighth consecutive week of record highs for total inventories.

After a big fall earlier in the week, declines in the wake of the U.S. data were not high as market bulls noted that inventories were well below expectations in the Cushing, Oklahoma storage hub.

Within two hours of that data, prices made a comeback after Tehran’s ambassador to the International Atomic Energy Agency, Reza Najafi, said a timeline for any possible agreement covering Iran’s nuclear program was not acceptable.

On Tuesday, Iran, in negotiations with the United States and the five world powers, called as “unacceptable” comments by U.S. President Barack Obama that for an agreement to be successful Iran must commit a verifiable freeze its nuclear programme.

Brent saw a drop of 5 percent on Monday as investors were worried that a quick nuclear deal will remove U.S. and other Western government bans on Tehran and flood the market with new oil exports.

“The market certainly seems to have jumped on the latest Iran news, after earlier pricing in a nuclear deal and removal of sanctions,” said John Kilduff, partner at New York energy hedge fund Again Capital.

Saudi oil minister Ali al-Naimi said in a speech on Wednesday in Berlin that he expected oil prices to stabilize soon.

So “for now, the market is going to ignore the storage situation,” said Richard Hastings, macro strategist at Global Hunter Securities.

His remarks came after a rise on Tuesday in official selling prices for its oil deliveries to consumers in Asia and the United States, signaling strength in demand for oil.

“Raising the prices does show some faith in stronger demand which could be a bullish view, but we strongly believe that this number from EIA today has not been priced in yet,” said John Macaluso, research analyst at Tyche Capital Advisors. “We see this rally as an opportunity to establish positions selling into the strength.”

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