VIENNA, Austria, (AP) – Oil prices slipped Tuesday, dipping below three-month highs reached a day earlier and reflecting hopes that Iran’s detention of 15 British naval personnel may be resolved peacefully.
Still, the market remained poised to react to any boost in tensions over the detentions. The standoff over Iran’s refusal to heed the U.N. Security Council’s demand that it freeze uranium enrichment also put a high floor under prices, along with expectations that the latest snapshot of U.S. supplies will reveal substantial stock draws.
Light, sweet crude for May delivery on the New York Mercantile Exchange fell 36 cents to $62.55 a barrel in electronic trading by midday in Europe. On Monday, the contract rose as high as $63.30 a barrel in New York — a level not seen for the front-month contract since Dec. 21.
Brent crude for May was down 2.3 cents at $64.18 a barrel on the ICE Futures exchange in London.
Iran detained the sailors and marines on Friday, triggering concerns it may lead to a cut in Persian Gulf exports and from Iran, the Organization of Petroleum Exporting Countries’ second-largest producer behind Saudi Arabia.
Iran said Monday it was questioning the 15 to determine if they had “intentionally” crossed over into Iranian waters, a sign that it could be seeking a way out of the impasse. Britain maintains the men were in Iraqi territory.
Eurasia Group analyst Greg Priddy said he believed the standoff would be resolved without incident — though not immediately.
“There is a potential for miscalculation but that’s not the most likely outcome,” he said, according to Dow Jones Newswires.
London-based Energyintel analyst Jane Collin said in a research note that a similar incident occurred in 2004, but was settled peacefully. But she said, “This time, the stakes are significantly higher.”
Iran is already at loggerheads with the West over its uranium enrichment program, and has decided to partially cut cooperation with the U.N. atomic watchdog agency in response to the Security Council’s vote over the weekend to approve additional sanctions on Tehran.
Vienna’s PVM Oil Associates said markets remained ready for the possibility that “if the standoff escalates, it could eventually disrupt (crude) exports through the Straits of Hormuz.”
Additionally, it predicted “a bullish forecast for products,” alluding to expectations that Wednesday’s U.S. weekly petroleum supply report, a key indicator of usage in the world’s largest energy consumer, will show relatively large declines in gasoline, diesel and heating oil stocks. Gasoline supplies have fallen for the past six weeks ahead of the summer driving season when demand usually peaks.
Natural gas was up 2.7 cents to $7.281 per 1,000 cubic feet on the Nymex, while heating oil fell nearly a cent to $1.7675 per gallon.