Oil prices steady but supported by Iran concerns

U.S. President Donald Trump has until May 12 to decide whether to restore the sanctions on Iran that were lifted after an agreement over its disputed nuclear programme.

The rise in oil prices means further accretion to the nation's Excess Crude Account, into which the difference between the market price of oil and the budget benchmark is saved to provide a cushion when oil prices fall or extra cash is needed for spending on infrastructure. French President Emmanuel Macron's prediction that the USA will pull out of the nuclear deal has boosted speculation over reduced shipments from the Islamic Republic. Still, expanding American drilling activity continues to limit price increases.

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading lower early Monday, but continue to hover close to their almost three-year highs reached earlier in the month. "I expect the market to have a good finish for the week given the uncertainty around the Iran deal", Baruch said.

There is a price divergence between WTI and Brent crude oil that could raise concerns with some traders, but can be explained easily so I don't think it is a major issue. Prices are up 5.2% for the month.

Brent crude, the global benchmark traded in London, closed at a level not see since late 2014.

Trade was quiet in Asia as many markets including China, India and Singapore were closed for public holidays. "We therefore see oil prices as being well supported".

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Money managers hold record positions in Brent crude futures and options, lured in by the hefty premium of the front-month June contract over subsequent months that makes it profitable to invest in crude over the longer term.

The risk of the USA pulling out of the Iran nuclear deal, resulting in sanctions on the producing nation, has already largely been priced in, underpinning the market, he said.

"They want to try and work out a deal that could be independent of any kind of Trump walk-away", said Bob Yawger, director of futures at Mizuho Securities USA Inc.in NY.

In the USA, working oil rigs rose by five last week to 825, the highest level since March 2015, according to data from Baker Hughes. The rig fleet has expanded throughout the entire month of April, adding a total 28. Investors are assessing if surging US production, which has topped 10 million barrels a day every week since early February, will undermine efforts by the Organization of Petroleum Exporting Countries to balance the market via output cuts.

Growing U.S. crude production and stockpiles have weighed on the market.

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