Brent Swings Near $40 as Falling U.S. Rigs Counter Iran Output

Brent crude, the global benchmark, swung between gains and losses near $40 a barrel as a dwindling rig count in the U.S. countered Iran’s plans to expand production.

Futures in London rose and fell by at least 0.5 percent. Active U.S. rigs dropped to the lowest level since December 2009, data from Baker Hughes Inc. shows. Iran plans to boost output to 4 million barrels a day before it will consider joining other suppliers in seeking to rebalance the market, Oil Minister Bijan Namdar Zanganeh said, according to the Iranian Students News Agency.

Oil has reversed its losses this year after slumping to a 12-year low amid speculation stronger demand and falling U.S. production will ease a worldwide surplus. Prices may have passed their lowest point as shrinking supplies outside the Organization of Petroleum Exporting Countries and disruptions inside the group erode the oversupply, the International Energy Agency said Friday.

“There is a downside risk to prices if Iranian output picks up a lot quicker than markets are expecting,” Angus Nicholson, an analyst at IG Ltd. in Melbourne, said by phone. “Oil has had some pretty good upward momentum, but there is still a huge amount of inventory that needs to be cleared.”

Brent for May settlement rose 11 cents to $40.50 a barrel on the London-based ICE Futures Europe Exchange at 11:11 a.m. Hong Kong time. The contract advanced 0.9 percent to $40.39 on Friday, capping a 4.3 percent increase for the week. The global benchmark crude was at a premium of 45 cents to WTI for May.

Bullish Bets

West Texas Intermediate for April delivery fell 7 cents to $38.43 a barrel on the New York Mercantile Exchange. The contract climbed 66 cents to $38.50 on Friday, the highest close since Dec. 4. Total volume traded was about 48 percent below the 100-day average. Prices rose 7.2 percent last week.

Speculators’ net-long positions in WTI gained by 39,509 contracts of futures and options combined to 174,949, according to the U.S. Commodity Futures Trading Commission. That’s the biggest increase since April and the highest level since October. Short positions fell by 38,233, the most in CFTC data going back to June 2006. Longs, or bets on rising prices, gained by 1,276.

Iran boosting output as operating U.S. drill rigs drop:

• Iran wants to boost output by 1 million barrels a day this year after international sanctions were lifted in January.
• Zanganeh will meet with Russian Energy Minister Alexander Novak on Monday, according to ISNA, which didn’t specify the location or topics of discussion. Novak is leading a Russian business delegation to Tehran.
• Active U.S. drill rigs declined by 6 to 386, falling for a 12th week, according to Baker Hughes.

--With assistance from James Paton To contact the reporter on this story: Ben Sharples in Hong Kong at bsharples@bloomberg.net. To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Aaron Clark

By: Ben Sharples

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