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Royal Dutch Shell Plc .com: Oil Prices Ease Ahead of Iranian Nuclear Talks

From The New York Times
By REUTERS
Published: July 9, 2006
Filed at 8:59 p.m. ET

SYDNEY (Reuters) – U.S. crude futures opened lower on Monday, extending the previous session’s 1.4 percent fall on expectations of progress in talks on Iran’s nuclear program.

Oil slid further back from Friday’s record intra-day high of $75.78 a barrel on signs of easing tension between the West and Iran, with European Union foreign policy chief Javier Solana set to meet Iranian representatives on Tuesday.

U.S. crude (CLc1) fell $0.41, or 0.55 percent, to $73.68 a barrel while London Brent crude was down 31 cents at $73.20, having also touched a record of $75.09 on Friday.

“We saw a big drop on Friday night as the Iranian talks kicked off,” said Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia. “It’s hard to want to short this market, but perhaps some of the reasons that drove us above $75 were seen to be flimsy, and investors locked into some profits.”

“It’s still not a result, with a long way to go, but some positive noises came out of early talks on Iran,” he said.

The European Union said it expected a “substantial response” from Iran at talks this week on a package of incentives to end a nuclear standoff, describing an initial meeting as constructive.

Iran’s representatives said Friday’s opening talks were ”very fruitful,” adding that the European Union could increase Tehran’s confidence in the negotiating process by lifting restrictions it had placed on exports of some industrial goods to Iran.

Strength in oil prices has been fueled in part by tension arising from accusations that Iran has a secret program to build nuclear weapons. Iran, the world’s fourth largest oil exporter, denies the charge and says its nuclear work is solely for power generation.

Western powers have demanded Iran make a full reply to an offer of a package of incentives for it to halt nuclear enrichment by the time of a July 15 Group of Eight summit in St. Petersburg.

Oil in New York is up over 20 percent this year because of the Iranian dispute, supply cuts in Nigeria and a flood of investment fund money into commodities. North Korea’s missile tests last week added to global tensions.

Adjusted for inflation, oil is more expensive than at any time since 1980, the year after the Iranian revolution.

Rebel attacks in Nigeria have shut almost a quarter of the country’s output. Last week gunmen abducted a Dutch man who was working on an unfinished Shell (RDSa.L) plant in the world’s eighth-largest oil exporter.

Prices have also been supported by resilient demand, with reports last week pointing to growth in U.S. gasoline demand even with retail prices hitting a one-year high on July 7, selling for nearly $3 per gallon for the first time since hurricane damage caused a shortage last summer.

NYMEX gasoline fell $0.0202, or 0.90 percent, to $2.2192.

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