Iran and Saudi moves push oil prices up

The lifting of sanctions by the US and Europe could allow Iran to boost its crude production, but that is not likely to happen until next year. Photo / AP

Oil rose after Iran's nuclear accord with world powers left the timing of increased crude supplies from the Opec member uncertain and as Saudi Arabia raised prices for shipments to Asia.

Futures climbed as much as 2.5 per cent in New York over Easter. Physical oil markets won't be affected by Iran before 2016, as the potential lifting of sanctions, which could allow the Persian Gulf nation to boost production, still faces obstacles, according to Morgan Stanley.

Saudi Arabia, the world's biggest crude exporter, narrowed the discount on its main Arab Light grade for May sales to Asia.

Oil has advanced the past three weeks amid speculation that Iran won't be able to boost its crude exports immediately and add to a global supply glut that drove oil almost 50 per cent lower in 2014. Global crude demand is improving, Saudi Arabia Oil Minister Ali al-Naimi said on March 23.

"There isn't going be an immediate removal of sanctions against Iran as it initially requested, so there won't be a huge change in supplies in the near future," Hong Sung Ki, a commodities analyst at Samsung Futures in Seoul, said.

"The Saudis are raising OSPs because there seems to be some support from the demand side."

West Texas Intermediate for May delivery gained as much as $1.21 to $50.35 a barrel in electronic trading on the New York Mercantile Exchange and was at $49.88 at 12.20pm Seoul time. A preliminary accord last week with world powers signals Iran may be able to accelerate crude exports within months of a final agreement that negotiators plan to conclude in June. The US and European Union would lift economic sanctions on the Persian Gulf nation if the International Atomic Energy Agency verifies its compliance with curbs on its nuclear programme.

If Iran expands output by 1 million barrels a day and clears supplies held in floating storage, any "cyclical recovery" in global oil prices could be delayed by as long as one year, according to Morgan Stanley. The verification by the IAEA could take more than six months.