Oil falls on potential Iran deal, economy concerns

Wed May 23, 2012 11:33am EDT
 
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By Simon Falush

LONDON (Reuters) - Oil fell on Wednesday as signs of a looming deal between Iran and the U.N. nuclear watchdog eased fears of a supply disruption, while the euro zone debt crisis and a slowing Chinese economy raised worries over demand.

A U.S. Energy Information Administration (EIA) weekly report showing U.S. crude inventories, excluding Strategic Petroleum Reserves, logged the biggest nine-week build on record also helped depress prices.

World powers began talks with Iran on Wednesday to test its readiness under pressure of sanctions to scale back its nuclear program, seeking to ease a decade-old standoff.

The U.N.'s International Atomic Energy Agency expects to sign a deal with Iran soon to unblock investigations of its nuclear program, which Tehran says is for peaceful purposes.

Brent crude fell $2.49 per barrel to a low of $105.92, its lowest since December, before recovering a little to trade around $106.50 by 1510 GMT. U.S. crude futures fell $1.67 to a low of $90.18.

Brent oil has fallen from a peak of $128.40 at the start of March and is down 13.5 percent this quarter, its biggest drop since the fourth quarter of 2008.

Analysts argue there may be scope for fresh weakness.

"The Iranians seem to be softening their position and that could lead to an easing of sanctions," said Christopher Bellew at Jefferies Bache.   Continued...

 
Containers filled with oil cleaned up from the oil spill site are seen at Beilianggang port in Dalian, Liaoning province July 24, 2010. REUTERS/Stringer