Oil settles higher; fears of Iran sanctions end early slide

NEW YORK (Reuters) - Oil prices rebounded from an early slide to finish higher and strengthen further in post-settlement trade, as investors feared U.S. sanctions could dampen Iran’s output.

FILE PHOTO: An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015. REUTERS/Rick Wilking/File Photo

“It’s tweet by tweet,” said Phil Flynn, analyst at Price Futures Group, saying the market is swinging in response to posturing from the United States and OPEC members.

Oil prices tumbled early on fears that oversupply could return. Iran’s oil minister Bijan Zanganeh said there would be no need to extend a pact between the Organization of the Petroleum Exporting Countries and non-OPEC producers if oil prices strengthened, the ministry’s official website SHANA reported.

Flynn said the market recovered on conviction U.S. sanctions could dampen Iran’s output, even if the nation produces above its OPEC quota.

Also supporting prices, energy information provider Genscape showed a decline in inventories at the Cushing, Oklahoma storage hub for U.S. crude.

Brent crude futures settled up 65 cents, or 0.9 percent, to $74.71 a barrel, after falling as low as $73.13. U.S. West Texas Intermediate crude futures rose 24 cents to $68.64 a barrel, rebounding from a session low of $67.14. The difference between the two benchmarks was at its widest since Jan. 8..

In post-settlement trading, Brent kept edging higher to $75.08 a barrel.

Since early 2017, OPEC, Russia and other non-OPEC crude producers have curbed output to reduce a global oil glut. The pact runs until the end of 2018.

“We continue to watch whether the fundamental picture continues to tighten,” said Gene McGillian, vice president of research at Tradition Energy.

In early trade, oil fell along with other raw materials after the United States gave American customers of Russia’s biggest aluminum producer Rusal more time to comply with sanctions.

This month, oil has risen to its highest since late 2014. Prices have been supported by U.S. sanctions on Russian companies and individuals and by fears Washington may take new measures against struggling Venezuela and especially OPEC member Iran.

“Added price pressure comes from U.S. sanctions against the key oil exporting nations of Venezuela, Russia and Iran,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

“Stay long oil,” JPMorgan said in a separate note.

The United States has until May 12 to decide whether it will leave a nuclear deal with Iran and impose new sanctions against Tehran.

“The uncertainty of the administration makes things very difficult,” McGillian said, cautioning that sanctions against Iran or Venezuela could also cause market swings.

Additional reporting by Henning Gloystein in SINGAPORE and Amanda Cooper in London; Editing by Marguerita Choy and David Gregorio