Brent climbs above $109; Iran, Fed policy in focus
By Jessica Jaganathan SINGAPORE (Reuters) - Brent crude oil futures climbed above $109 a barrel on Wednesday as investors remained sceptical whether relations between the United States and Iran would thaw amid new talks over the OPEC nation's nuclear program. The West's standoff with Iran over its nuclear ambitions has helped support oil prices for nearly a decade. Years of sanctions have cut Iranian oil exports by more than 1 million barrels per day (bpd) to less than half their pre-2012 levels. Uncertainty about the U.S. Federal Reserve's outlook for monetary stimulus added to investor caution. An improvement in supply from Iraq and Libya, however, and an assurance by Saudi Arabia's oil minister that the oil market has enough supply capped oil price gains. Brent crude oil futures climbed 42 cents to $109.06 a barrel by 0630 GMT. U.S. crude gained 48 cents to $103.61 a barrel, after four days of losses that drove it to seven-week lows in the previous session. "There are some hopes there might be a gradual forging of relationship between the west and Iran, though it's still very early days," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "The overall risk of supply disruption in the Middle East is a constant present for the oil market ... It's very hard to know what will happen in Iran, except that if there was in fact a stabilisation, that would be a significant development." Iran has agreed to talks on its nuclear program with top diplomats from six world powers on Thursday, including U.S. Secretary of State John Kerry, strengthening hopes Tehran's relations with the United States could thaw. But a failed effort to arrange a simple handshake between U.S. President Barack Obama and Iran's President Hassan Rouhani on the sidelines of the United Nations General Assembly highlighted entrenched distrust that will be hard to overcome. Rouhani told CNN he did not meet Obama at the U.N. General Assembly because the two sides "didn't have sufficient time to really coordinate the meeting". Obama also appealed to the United Nations on Tuesday to back tough consequences for Syria if it refused to give up chemical weapons and urged Russia and Iran to end their support for Syrian President Bashar al-Assad. Syria is not a major oil producer but traders worry any escalation of Middle East violence could disrupt oil flows. SUPPLY IMPROVES Oil supply has improved, as Iraq boosted output from its southern oilfields after repairing a leaking pipeline, although planned work continued to keep a lid on exports from OPEC's No. 2 producer. Saudi Arabia's Oil Minister Ali al-Naimi also allayed supply fears when he said the oil market had enough supply and prices were at a favourable level, affirming the willingness of the world's top crude exporter to meet shortages. U.S. crude stocks fell by 54,000 barrels last week, less than the 1.1 million barrel draw anticipated by analysts, data from industry group the American Petroleum Institute showed on Tuesday. Refined product inventories rose by more than 800,000 barrels. The more closely watched data from the U.S. government Energy Information Administration will be released on Wednesday at 10:30 a.m. EDT (1430 GMT). "We view WTI fundamentals as stronger, but, in the midst of rapid U.S. crude oil supply growth we see physical fundamentals deteriorating next year. This will threaten to reverse the recent narrowing in the WTI-Brent spread," Deutsche Bank analysts said in a note on Wednesday. Investors were also cautious on continuing uncertainty about the Federal Reserve's policy outlook. The Federal Reserve must for now continue to push hard against threats to the U.S. recovery, but should still be able to reduce its support for the economy later this year, an influential central bank policymaker said on Monday.
