Oil Prices Rally on News of More Iranian Sanctions
After trading at a loss for most of the day, oil prices rallied late Thursday afternoon to close the session 0.3% higher.
Light, sweet crude for August delivery settled at $86.08 a barrel on the New York Mercantile Exchange, up 27 cents. Brent crude on the ICE futures exchange was trading at $100.83 a barrel, up 60 cents.
Oil had been trading at a loss for much of the session due to concerns about economic weakness. But the U.S. Treasury Department Thursday afternoon imposed additional sanctions against Iran's nuclear and ballistic-missile-proliferation networks and identified a group of Iranian front companies and banks in order to prevent the evasion of sanctions.
Summit Energy's Matt Smith attributed the late rally to the news on Iran. "On a day like today, where we see the euro lower, this news takes geopolitical risks back to the center," Mr. Smith said.
The Iran-sanctions news followed the release of the International Energy Agency's monthly report, which gave a muted picture of the oil market, among other developments that left oil in the red for most of the day.
The IEA, the energy watchdog of rich consuming countries, said global oil demand would rise by 1 million barrels a day next year. The forecasts are more bullish than reports earlier this week from the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries, both of which projected slower global oil-demand growth in 2013 of 730,000 barrels a day and 800,000 barrels a day, respectively.
At the same time, some observers were struck by language in the report that gave a downcast tone to the oil prices.
"While the economic risks encompassed in our weaker GDP and demand profile this month also hint at something of a price ceiling, the latent potential of emerging market demand growth and ongoing risk of nasty supply surprises could keep prices stubbornly high in absolute terms," the IEA report said.
The Price Group's Phil Flynn said the language was unusual for the IEA, which usually plays up the chances for higher oil prices at any opportunity.
"Anytime the IEA is downbeat on prices, you tend to listen," Mr. Flynn said. "They're acknowledging that the market is oversupplied."
Analysts earlier Thursday said the market is girding for disappointing second-quarter Chinese-growth results, expected Friday. Adding to the gloom was a report by the Asian Development Bank that trimmed its economic forecasts for the U.S., the euro zone and developing economies in Asia, citing a poor global economic outlook.
Oil prices also had been negatively affected by a strengthening of the dollar earlier in the session. Because oil trades in dollars, a stronger dollar makes the commodity more costly for consumers who trade in other currencies.
Front-month reformulated gasoline blendstock, or RBOB, settled at $2.80 a gallon, up 3.7 cents. Front-month heating oil futures settled at $2.78 a gallon, up 1.2 cents.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.