SINGAPORE, AP – Crude futures dipped slightly Tuesday, little changed from the $69 a barrel mark seen in recent days, despite President Bush’s threats to Iran that nations worldwide will not back down from their demand that Tehran suspend uranium enrichment.
Concerns over Iran’s nuclear ambitions have not abated, on mixed signals from Tehran over the program. Traders, meanwhile, are concerned that Iran, the world’s fourth-largest oil producer, might reduce its oil exports as a result of its showdown with the West over its nuclear program.
On Monday, Bush said that if Iran’s leaders reject the offer of incentives, they will face action before the U.N. Security Council and progressively stronger political and economic sanctions.
Light, sweet crude for July delivery fell 8 cents to $68.90 a barrel in electronic trading on the New York Mercantile Exchange.
Traders took relief from conciliatory remarks out of Iran Saturday that the Western package of incentives meant to persuade the Islamic republic to give up its uranium enrichment program was “a step forward.”
However, on Sunday, Iran accused the United States of steering Europe away from a possible compromise over the issue of Iran’s nuclear ambitions. Foreign Ministry spokesman Hamid Reza Asefi said America’s insistence on conditional negotiations over a Western incentive package has narrowed the scope of potential talks and made it tougher for all parties to reach a solution.
“The calming comments from Tehran have taken out part of the risk premium, but the threat of a potential supply disruption from Iran is still present, although not imminent,” said Victor Shum, a Singapore-based energy analyst with Purvin & Gertz.
“In the short term, if we see progress toward a diplomatic resolution in Iran, prices will drop to the low to mid $60s,” he said.
The market is currently in a “static environment,” and investors might be shifting their funds out of oil at the end of the second quarter, depressing prices even further, Shum said.
Prices were also weighed down Monday on comments from the Organization of Petroleum Exporting Countries that high prices were affecting demand, and the prospect of slowing economic growth caused by rising interest rates.
In its June monthly market report, the OPEC noted that oil demand has not risen as much as expected given global economic activity now, and that the current high prices are slowing oil demand, according to the cartel, which forecast a 1.4-million-barrel-per-day increase in world oil demand in 2006.
In other Nymex trading, heating oil futures fell marginally to $1.8930 per gallon, while natural gas futures fell 17 cents to $6.72 per 1,000 cubic feet. Gasoline futures slipped slightly to $1.988 a gallon.