Oil prices drop as Iran says OPEC unlikely to trim output

Oil prices fell Friday after Iran's minister to OPEC said the group was not likely to cut production at its June meeting despite signs of surplus supply in the market.

Hossein Kazempour Ardebili said Friday that the Organization of Petroleum Exporting Countries wants to reassure the market as geopolitical concerns have driven prices up.

"The fundamentals call for a cut," he said, but said the group would not cut output.

Traders have been concerned about how the West's standoff with Iran will affect that nation's oil exports as well as supply disruptions in Nigeria and the Gulf of Mexico during hurricane season.

"The market took to heart the conciliatory talk out of Iran," said John Kilduff, an energy analyst at Fimat USA.

Light, sweet crude for June delivery on the New York Mercantile Exchange dropped 80 cents to $68.65 a barrel in electronic trading by afternoon in New York. July Brent crude on London's ICE futures exchange fell 46 cents to $69.21.

OPEC acting Secretary-General Mohammed Barkindo said Friday that geopolitical tensions were causing a premium of up to $15-a-barrel on crude prices, and urged governments of both producing and consuming countries to ease the tensions.

"Remove the impediment of geopolitical concerns, tensions, and the resulting speculation and the oil price will find its rightful place in the market," he said at a meeting in Norway between OPEC and the International Energy Agency.

A stronger dollar also caused an exit from most commodity markets Friday, according to Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York. The dollar rose against the euro and yen in European trading after several days of declines.

"The market tried to trade higher overnight, but by morning it started to reverse," he said. "It has primarily been a spillover effect of a commodity-wide sell-off we're seeing today."

Gasoline futures barely rose to $2.0180 a gallon while heating oil futures dropped 2.03 cents to $1.9310 a gallon.

U.S. government data released Wednesday showed the domestic supply of gasoline rose for the third straight week amid stagnating demand. The Department of Energy said domestic gasoline supplies grew by 1.3 million barrels last week to 206.4 million barrels.

While that is 3.5 percent below year-ago levels, it comes at a time when gasoline consumption appears to be flattening out as a result of high prices.

Other data showed crude oil inventories slipping by 100,000 barrels last week to 346.9 million barrels, or 4.7 percent higher than last year, and distillate fuel stocks also falling by 100,000 barrels to 114.6 million barrels, or 7 percent higher than last year.

Meanwhile Friday, natural gas futures fell 3 cents to $5.970 per 1,000 cubic feet. The drop followed U.S. Energy Department data showing natural gas in storage rising above 2 trillion cubic feet, which is more than 50 percent higher than the 5-year average for this time of year, reports AP.