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Oil steady as OPEC says it could offset Iranian supply loss

The UAE energy minister said three members of the Opec - Saudi Arabia, Kuwait and the UAE - together have enough capacity to act as a cushion

Gulf News

London: Oil steadied near $71 (Dh261) as Opec signalled it could fill in any supply gap if renewed US sanctions curtail shipments from Iran, the group’s third-largest producer.

Futures in New York were little changed after sliding 0.9 per cent Friday. Three members of the Organization of Petroleum Exporting Countries — Saudi Arabia, Kuwait and the United Arab Emirates — together have enough capacity to act as a cushion, the UAE energy minister said. Meanwhile, Iran called for clarity over its nuclear deal with world powers, following US President Donald Trump’s withdrawal from the 2015 pact.

Oil rallied earlier this month to the highest level in more than three years as Trump’s decision to walk away from the Iranian nuclear accord fuelled tensions in the energy-rich Middle East. Investors are now weighing signals from Opec and its allies to see whether they will respond to the situation in Iran by ending an agreement to cut production, or maintain the curbs to further prop up prices.

“Even though the reaction to the Iran nuclear-deal situation has been bullish, it can be argued that the market is still somewhat confused,” Vienna-based consultant JBC Energy GmbH said in a note. “Rhetoric out of Europe, Iran and even Opec itself in terms of potential supply compensation makes it really difficult to establish a view with a decent degree of conviction regarding timing and size” of any supply reduction due to sanctions.

West Texas Intermediate crude for June delivery traded up 11 cents at $70.81 a barrel on the New York Mercantile Exchange at 8:40am local time. Prices dropped 66 cents to $70.70 on Friday. Total volume traded Monday was about 15 per cent below the 100-day average.

Brent for July settlement advanced 36 cents to $77.48 a barrel on the London-based ICE Futures Europe exchange, after declining 0.5 per cent on Friday. The global benchmark crude traded at a $6.70 premium to July WTI.

Futures for September delivery on the Shanghai International Energy Exchange fell 1.2 per cent to 465.5 yuan a barrel. The contract closed down 1.1 per cent on Friday.

Forecasts for Iranian supply losses vary from “little impact” anticipated by Barclays Plc to declines of 500,000 to 1.5 million barrels a day predicted by BMI Research and consultant FGE.

In a Bloomberg Television interview, UAE Energy Minister Suhail Al Mazrouei said “don’t worry about supply,” because Opec has an adequate “buffer” of potential production to offset barrels lost through renewed sanctions. He serves this year as the body’s president.

In Beijing, Iranian Foreign Minister Javad Zarif met with his Chinese counterpart Wang Yi at the Asian nation’s invitation, marking his first stop on a diplomatic tour after the US withdrew from the nuclear deal. The two parties didn’t disclose whether the world’s biggest crude importer will scale back purchases in light of the renewed sanctions. Zarif is scheduled to meet the British, French and German foreign ministers this week.