Oil declines as Iran pledges more supply after OPEC keeps target

SINGAPORE (BLOOMBERG) - Oil fell as Iran's vow to boost crude exports after OPEC maintained its production target renewed speculation that a global glut will persist.

Futures dropped as much as 1 per cent in London, extending the biggest weekly loss since March. Iran can double its overseas sales within six months of international sanctions ending even if prices decline, said its representative to the Organisation of Petroleum Exporting Countries (OPEC), the state-run Islamic Republic News Agency reported.

Oil's rally from a six-year low in January has faltered on signs OPEC will continue to pump into an oversupplied market. With world powers including Russia and the U.S. planning to complete nuclear talks with Iran by June 30, the possibility of increased supply from the Persian Gulf nation presents a near- term "headwind", according to Morgan Stanley.

"It's now hard to see additional upward pressure on oil," Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul, said by phone. "It will be difficult to see whether Iran will be able to instantly boost exports when the sanctions lift, but it will definitely be bearish for prices in the short run."

Brent for July settlement slid as much as 61 cents to US$62.70 (S$85) a barrel on the London-based ICE Futures Europe exchange at 10:50 a.m. Singapore time. The contract decreased 3.4 per cent last week, the most since March 13. The European benchmark crude traded at a premium of US$4.21 to West Texas Intermediate, the U.S. marker grade.

WTI for July delivery fell as much as 63 cents, or 1.1 per cent, to US$58.50 a barrel in electronic trading on the New York Mercantile Exchange. It dropped 1.9 per cent last week, the first decline since March. The volume of all futures traded was 65 per cent below the 100-day average.

Iran's oil exports were reduced to about 1 million barrels a day a day in mid-2012 following penalties against its nuclear program. It may start shipping crude to Russia this week as part of an oil-for-goods agreement, Oil Minister Bijan Namdar Zanganeh said at the weekend after OPEC's meeting Friday.

"We believe the market will increasingly turn its attention to the risk that Iran could add new supply to the market as the June 30 deadline approaches," Morgan Stanley analysts including Adam Longson in New York said in a report Monday. "Investors will be searching for a catalyst to provide direction for oil prices."