* Seaway pipeline reversal targeted to begin May 17
* Spanish 10-year bond yields top 6 pct
* Iran talks trim geopolitical risk premium
* Coming up: API U.S. petroleum data, 4:30 p.m. Tuesday
(Updates market prices, activity and adds details)
By Gene Ramos
NEW YORK, April 16 (Reuters) – Oil futures fell more than 2
percent on Monday on heavy transatlantic spreading trading
prompted by news the reversal on the Seaway crude oil pipeline
would begin earlier than expected if regulatory approval is
secured.
Prices began dropping early on eurozone worries triggered by
Spain’s debt problems and weekend talks between Iran and six
world powers about its disputed nuclear program.
Negotiators from Iran and the six nations that met in
Istanbul agreed to reconvene on May 23 in Baghdad and Iran’s
foreign minister said his country was ready to resolve all
nuclear issues in the next round of talks if sanctions against
Tehran were lifted.
The owners of the Seaway crude oil pipeline plan to begin
reversing its flow by May 17, earlier than previously expected,
if they get regulatory approval from the Federal Energy
Regulatory Commission (FERC). The pipeline will initially carry
about 150,000 barrels per day from the Midwest to the Gulf
Coast, helping ease the glut of oil in the region.
“The earlier-than-expected reversal of the Seaway pipeline
has triggered selling of the WTI-Brent spread,” said Gene
McGillian, analyst at Tradition Energy in Stamford, Connecticut.
In London, Brent crude for June delivery was down
$2.45 at $118.76 barrel, by 1:55 p.m. EDT (1755 GMT), after
dropping to a session low of $118.20, the lowest for front-month
Brent since Feb. 15.
U.S. crude for May delivery which expires on Friday,
shifted higher and was up 22 cents at $103.05 and the June
contract rose 12 cents to $103.44.
June Brent’s premium against its counterpart U.S. contract
stood at $15.32, after dropping to $15.14 earlier, the narrowest
since Feb. 29. On Friday, the spread closed at $19.
In recent months, higher production in the Midwest had
created an oversupply, depressing U.S. benchmark crude futures,
also known as West Texas Intermediate (WTI), relative to global
benchmark Brent crude.
EUROZONE, DEMAND WORRIES
Spain’s 10-year government bond yields topped 6 percent for
the first time this year as investors worried about the
country’s ability to contain its budget deficit, putting the
eurozone’s debt troubles once again in the spotlight.
“The overall mood is one of risk aversion after the news
from Spain,” said Eugen Weinberg, an energy analyst at
Commerzbank in Frankfurt.
The euro retreated broadly on concerns about Spain’s
economy, falling to a two-month low against the U.S. dollar.
The drop in oil prices followed losses on Friday spawned by
lower-than-expected first quarter economic growth in China, the
world’s largest energy consumer.
U.S. heating oil futures slid more than 6 cents, or nearly 2
percent in early trading, helping pull down U.S. crude futures.
Heating oil tumbled as demand for heating oil was forecast
to average 55 percent below normal this week, with warm
springtime temperatures forecast in the U.S. Northeast, the
biggest market for heating oil.
FOCUS ON IRAN
Market focus remained on Iran as traders awaited a
breakthrough in the talks. Iran’s tensions with the West over
its nuclear program was a major reason crude futures have risen
to this year’s high of more than $128 for Brent and $110 for
U.S. crude, both on March 1.
A European Union import ban on Iranian oil is set to start
July 1.
“Iran is back at the negotiating table, which has reduced
the possibility of immediate attacks on Iranian installations or
a blockade of the Straights of Hormuz, so the geopolitical
premium in Brent is waning,” said Commerzbank’s Weinberg.
The United States remained on guard and President Barack
Obama said more sanctions would be imposed against the Islamic
Republic if there was no breakthrough in nuclear talks with
global powers in the coming months.
(Additional reporting by Matthew Robinson and David Sheppard
in New York; Claire Milhench in London; Editing by Alden
Bentley, Sofina Mirza-Reid and Bob Burgdorfer)
