CRANBURY, N.J. (DTN) — New York Mercantile Exchange oil
futures were advancing in overnight trade, with the March crude contract
climbing from a one-month spot low after European Union members agreed to ban
oil from Iran starting July 1.
Tehr
an’s pursuit
of nuclear weapons have triggered action by western nations, with the
International Atomic Energy Agency late last year saying that Iran was
progressing in its efforts to make and deliver a nuclear weapon. Tehran denies
the allegations, saying they’re nuclear activities are for civilian purposes.
The EU agreement
was expected, with the July 1 timeline meant to give time to EU countries
currently importing Iranian oil to find alternative sources. Financially
troubled Greece was reportedly balking over the ban last week, fearing
increased costs. Reports indicate that some assistance might be provided to EU
countries detrimentally impacted by the Iranian oil ban.
The EU measures
also include a freeze on Iranian central bank assets, where payments for a
majority of Iran’s oil deals are processed. The United States, which already
bans Iranian oil imports, late last year targeted Iran’s central bank.
Tehran had
previously said it would retaliate to a ban on its oil by closing the Hormuz
Strait, a critical shipping lane for crude where an estimated 17.0 million bpd
of oil deliveries passed through in 2011. The U.S. promised to keep the strait
open. A U.S. aircraft carrier just passed through the strait.
The upside was
capped on concern that Greece will be able to reach an agreement with private
creditors over reducing its debt load, looking to wipe out about 100 billion
euros of its $360 billion euro debt load. The talks have dragged on for days
and throughout the weekend without striking a deal. Greece needs to satisfy
officials with the European rescue fund in order to receive its next bailout
installment ahead of a March 20 due date on its debt. The payment due is $14.4
billion euros or $18.5 billion.
Failure to reach accord with lenders and bailout
officials could trigger a chaotic default that is seen harming many other
European countries.
The Commodity
Futures Trading Commission reported late Friday that noncommercial market
players increased their net-long position in NYMEX oil futures through the
week-ended Jan. 17. The funds moved to a better than two-month high net-long
position in crude futures, a two-month net-long high in heating oil futures and
a nearly one-year high net-long stance for RBOB futures.
The growing
net-long position increases the risk for long liquidation selling, with the
March crude futures contract sliding to a one-month spot low of $97.40 bbl
overnight. The news on the EU ban reversed the decline.
Forecasted heating degree days for the week through Saturday (1/28)
continue to trail both year ago and seasonal averages, according to data
released this morning by the National Oceanic and Atmospheric Administration,
with HDDs for the New England and Mid-Atlantic states this week projected at
more than 25% below normal. For the season through Saturday (1/21), HDD
accumulations have trailed seasonal averages by 17%, limiting heating demand
