IPE Brent rises towards $73/barrel, supported by geopolitics

London (Platts)--5Jul2006

IPE Brent futures in London rose towards $73/barrel on Wednesday,
recovering from losses made on Tuesday as global geopolitical factors continue
to support the market, sources said.
At 1100 London time (1000 GMT) the front-month August IPE Brent futures
contract was changing hands at $72.79/barrel, up 28 cents from Tuesday's
settle, as US markets returned from the Independence Day holiday.
"The flat price is up a little this morning and is essentially a touch
stronger on the back of geopolitical fears," a London-based broker said.
On Tuesday Iran's top nuclear negotiator Ali Larijani said that he and
officials from the West would meet over Iran's nuclear standoff, the student
ISNA agency reported. However, only hours ahead of Larijani's arrival in
Brussels a senior Iranian official told AFP by telephone that Larijani had
pushed back the talks to next week. The postponement casts a cloud of
uncertainty over Iran's intentions and when its position will be made known.
The outcome of the now-rescheduled meeting and the long term potential
impact of the Iran situation continue to prey on the market, a trader said.
Further to this, a broker noted that North Korea's missile tests were
also adding a touch of support to the IPE Brent futures.
"I think we're all a bit concerned by what will happen with regard to
Iran as well as these (North) Korea missiles being blasted in to the Sea of
Japan," the broker said.
North Korea early Wednesday launched five missiles, including a
long-range Taepodong 2 capable of reaching US territory, in a move that US and
Japanese government officials dubbed provocative. Details of the launches are
still being analyzed, but a senior US government official confirmed that a
Taepodong 2 was one of the missiles fired.
Despite the concerns, market players said morning trading was thin,
although it is expected to pick up when the US markets return to work in full
later in the day.
During Monday and Tuesday, when the US markets were closed, volumes
traded on August IPE Brent futures have been near half the amount from last
Friday when both exchanges either side of the Atlantic were open.
The one notable change on the IPE Brent futures has been the weakening in
the inter-month spreads, particularly the August/September contango.
"Yesterday afternoon we saw the start of the weakening of the spreads.
The August/September spread has gone from around minus 60 cents to around
minus 86 cents this morning. It shows that supplies in the North Sea are
adequate. However, ultimately any supply disruption in the next couple of
months from hurricanes or any geopolitical event is keeping prices
underpinned," a broker said.

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