WTI eases after biggest gain in a week on U.S. debt deal, Iran talks, inventories data

Both West Texas Intermediate and Brent benchmarks eased after rising the most in a week on Wednesday as U.S. lawmakers managed to reach an agreement on extending the nations borrowing authority through February and reopening the federal government. A possible thaw in relations between Iran and Western major powers after a two-day meeting in Geneva however capped gains. Prices were also pressured after API reported that U.S. crude inventories rose more than expected last week. Market players are bracing for the upcoming backlog of U.S. economic data after the government resumes operations.

On the New York Mercantile Exchange, WTI crude for delivery in November fell by 0.34% to $101.94 per barrel at 6:58 GMT. Prices held in range between days high and low of $102.31 and $101.81 per barrel respectively. Light, sweet crude added 0.9% on Wednesday, the most in a week, but trimmed its daily advance to little over 0.1% following Thursdays fall.

Meanwhile on the ICE, Brent futures for December settlement slipped 0.17% to $110.41 per barrel at 6:58 GMT and shifted in a days range between $110.67 and $110.27 a barrel. The European benchmark rose by 1.3% on Wednesday, the most since October 10, but extended its weekly decline to over 0.5% on Thursday.

Oil regained positions yesterday after U.S. lawmakers reached an accord to raise the nations debt ceiling and end a 16-day government shutdown. The agreement was however just a temporary measure and was seen as kicking the can down the road. The bill provided government funding until January 15 and extended the nations borrowing authority through February 7. The Democrat-controlled Senate passed the measure with 81 votes in favor against 18, followed by a 285-144 vote in the Republican-controlled House of Representatives three hours later. There was no resolution to lawmakers long-term divides on fiscal policy and no major policy changes sought earlier by Republicans were achieved.

ANZ analysts wrote in a note: “The deal has come not a moment too soon with the US Treasury expecting the debt ceiling to be breached on Oct. 17, potentially causing default in the weeks that follow if an interest payment had been missed. In reality, politicians have done little more than kick the can down the road three to four months.”

Iran talks

A positive atmosphere in the negotiations between Iran and Western major powers over Tehrans nuclear program pressured prices down. Although there was no deal struck between the two sides after concluding a two-day meeting in Geneva, arrangements for a second round of talks within three weeks spurred speculations for a thaw in relations.

Israel, Iran’s biggest enemy, asked the six world powers, the U.S., U.K., France, China, Russia and Germany, to demand a full shutdown of the country’s uranium enrichment program and rule out any early sanctions removal, something which Iran said was out of question and offered to reduce uranium enrichment by 20%.

An unnamed delegate said for RIA: “Apart from suspending 20 percent enrichment, it is possible to consider a scenario involving reducing the number of centrifuges. However, for this, concrete steps from our opponents are required, which we do not see yet.”

This was the first round of talks between Iran and the Western nations since the election of the moderate President Hassan Rouhani who sought to end a decade-long dispute over Tehrans nuclear program and ease sanctions on the countrys crude exports which have battered Irans economy. U.S. and EU diplomats said the negotiations were held in a constructive atmosphere and went into more detail. Specialists are expected to reconvene and continue discussions within three weeks.

Also pressuring the oil market, the industry-funded American Petroleum Institute reported on Wednesday that U.S. crude oil reserves rose by 5.94 million barrels last week, underperforming expectations for a 2.2 million barrels increase according to a Reuters poll. Inventories at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, rose for the first time since July. Motor gasoline supplies fell by 2.21 million barrels last week, API said, while distillate fuel reserves declined by 1.32 million barrels. APIs statistics are based on voluntary information from operators of pipelines, refineries and bulk terminals.

Market players are bracing for the upcoming release of delayed U.S. economic data after the federal government resumes operations. Yusuke Seta, a commodity sales manager at Newedge in Tokyo, said for CNBC: “With U.S. Congress postponing the deadline and talks between Iran and Western countries progressing in a very, very positive atmosphere, oil prices could go lower going forward. A clear direction for the market will emerge once we start to see the U.S. data delayed due to the shutdown.”

Investors will also be keeping a close watch on key economic data from China due on Friday. China’s National Bureau of Statistics will likely report that the country’s economy grew by 1.9% in the third quarter, up from 1.7% in the previous three months. The median forecast of 21 analysts surveyed by Reuters showed that year-on-year China’s economy has expanded by 7.8% in the third quarter, up from 7.5% in the previous period.

The national agency is also due to release the country’s retail sales which likely inched up to 13.5% in September from 13.4% in the preceding month. Industrial production is projected to have expanded by 10.1%, slightly below August’s 10.4% advance. The Asian nation accounted for 11% of global consumption in 2012, ranking second after the U.S. with 21%.