Oil slips after U.S. rig count rises; Iran concerns cap downside

Short Sellers Circle Oil and Gas Stocks as Crude Price Climbs

Short Sellers Circle Oil and Gas Stocks as Crude Price Climbs

The sentiment Thursday shifted from earlier in the week, when oil prices fell after Trump said the USA and France could reach an agreement "fairly quickly" on the Iran nuclear deal.

US President Donald Trump is facing a May 12 deadline to decide whether to restart US sanctions against Iran, potentially ending the 2015 deal that halted sanctions in order to end Iran's nuclear program.

Brent crude for June settlement, which expires Monday, dropped 74 cents to $73.90 a barrel on the London-based ICE Futures Europe exchange. Trump declined to say what he'll do on the Iran deal.

On Friday, US Secretary of State Mike Pompeo said at a news conference that Trump would exit the deal next month "absent a substantial fix".

Oil fell as the USA oil rig count rose for a fourth week, but was still poised for a second monthly advance.

Still, crude prices were within striking distance of a more than three-year high hit in late April, and analysts said the market is sensitive to any developments on Iranian sanctions.

Crude hovered near $68/bbl amid signals that an Iran nuclear accord may live on, even without the U.S.

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But while US producers are accelerating shale drilling in areas in the United States, higher production has not necessarily translated into stronger refining results for some oil companies.

Brent was on track for a weekly gain of about 1 percent, while WTI was set for a weekly loss of about 0.3 percent.

West Texas Intermediate (WTI) crude for June delivery traded at $67.48 a barrel on the New York Mercantile Exchange, down 62 cents, at 8.23am in London. The global benchmark crude traded at a US$6.43 premium to June WTI.

"There are worries that Iran's oil exports could fall by about 1 million barrels per day from current levels", said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. Crude stockpiles at the biggest US storage complex rose by an estimated 1 million barrels last week, according to a forecast compiled by Bloomberg. US crude stockpiles probably increased by 1.25 million barrels, according to the median estimate of analysts surveyed by Bloomberg.

In the US, working oil rigs rose by five last week to 825, the highest level since March 2015, according to data from Baker Hughes.

According to the its April commodity markets outlook, oil prices will average $65 a barrel through 2018, 22% higher than the average price of $53 in 2017, due to the combined effect of production cut by the Organisation of the Petroleum Exporting Countries, OPEC, and its allies led Russian Federation, and an increase in demand for the products.

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