Oil rebounds above $64 ahead of Iran debate

The upcoming IAEA debate over Iran and renewed concerns over disruptions to Nigerian supplies spurs price rise.

india Updated: Sep 13, 2006 11:50 IST

Oil edged up above $64 a barrel on Wednesday as traders cautiously await the debate among members of the UN nuclear watchdog over Iran's atomic work, and on renewed concerns over disruptions to Nigerian supplies.

Prices had fallen for seven-straight sessions to the lowest mark in almost six months on Tuesday after Iran sounded a softer note on its nuclear plan, OPEC agreed to keep supplies steady and BP raised hope for a quicker resumption of Alaskan supplies.

US light crude for October delivery was up 31 cents at $64.07 a barrel by 0452 GMT after falling $1.85 on Tuesday to $63.76, the lowest level since March 22. London Brent crude was 37 cents higher at $63.36. Prices had also rebounded in early Asian trade on Tuesday before reversing gains.

"The market seems to be in a freefall and picking the bottom is anybody's guess. But I would think that this price fall is just a steep correction as I would expect demand to return after the autumn lull in the winter," said Tony Nunan, a risk manager with Mitsubishi Corp in Tokyo.

"I think the geopolitical issues, Iran included, could still flare up again in the near future. Iran is still an issue and the situation in Nigeria is another."

Most members of the 35-nation International Atomic Energy Agency's governing board, a gauge of world sentiment on Iran, are likely to champion talks to defuse a row over Iran's nuclear work in a debate later on Wednesday, diplomats say.

But they are also expected to tread cautiously in the debate, which is balanced between diplomatic progress and confrontation.

Weekend talks at which diplomats said Iran offered to consider temporarily halting uranium enrichment were viewed as reviving hopes for averting sanctions and the risk of economic and security repercussions, but Washington denied on Tuesday that Tehran had made such an offer.

Secretary of State Condoleezza Rice, who on Monday hinted the US might be open to such an offer, on Tuesday appeared to harden her stance, insisting the US position was unchanged.

Divided Outlook

In the latest in a series of attacks on oil workers in Nigeria, the world's eighth-largest oil exporter, pirates raided an American oil services ship off the coast on Tuesday, killing a Nigerian worker and wounding two others, industry officials said.

The assault came a day before oil workers across Nigeria are due to stop work for three days from Wednesday to protest growing insecurity in the Niger Delta, after the killing of another oil worker last month. But unionists said they might limit the impact of the action on crude production.

On a bearish note, a BP Plc executive told a US Senate committee he hoped output from its problem-plagued Prudhoe Bay field in Alaska, which accounts for 8 percent of US domestic crude output, could resume at its full 400,000 barrels per day (bpd) capacity by end-October.

It is seeking government permission to resume output on the eastern part of the field, shut since early August.

The Atlantic hurricane season, well into its peak, has proven to be milder than expected and yet to inflict any significant damage on oil infrastructure on the US Gulf Coast.

Analysts were divided over whether the price fall was the start of a longer-term bear cycle, or a steep correction in a still-bullish market.

The latest fall for Brent crude has entered the technical definition of a bear market -- a drop of 20 percent from the market's peaks -- a fall of 20 percent or more, although even deeper drops in the autumns of 2004 and 2005 were later followed by swift rallies to new record highs.

First Published: Sep 13, 2006 11:50 IST