By Jenny W. Hsu
Crude futures rose slightly in Asia on Monday as the U.S. government was poised to scrap a rule that calls for transparency on payments by energy and metals firms to foreign governments.
If approved, the change would mean fewer restrictions on American energy companies investing in foreign countries.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at $53.89 a barrel at 0233 GMT, up $0.06 in the Globex electronic session. April Brent crude on London's ICE Futures exchange rose $0.06 to $56.87 a barrel.
Over the weekend, crude oil pivoted higher as energy investors digested the news that the Trump administration is prepared to roll back the Dodd-Frank Act, including nullifying the requirement for extractive-industry corporations, such as oil and gas companies, to disclose their payments to foreign governments, said the Singapore-based Oversea-Chinese Banking Corp. in a note.
The Security and Exchange Commission's transparency rule went into effect in 2010. The intention was to reduce corruption in resource-rich countries by requiring energy and mining companies to account for the royalties and payments they make to those foreign governments.
The White House said the SEC rule "would impose unreasonable compliance costs on American energy companies that are not justified by quantifiable benefits."
"Moreover, American businesses could face a competitive disadvantage in cases where their foreign competitors are not subject to similar rules," the White House said.
Analysts say tension between the U.S. and Iran is also keeping prices on the rise.
"While the move by the U.S. to impose new restrictions on Iran for testing a ballistic missile, it does raise the risk of further tensions disrupting supply," said a report by ANZ Research.
Iran, which produces around 3.7 million barrels a day, was welcomed back to the global oil markets in January last year after the U.S. lifted the sanctions against its oil exports. Even though the country is a participant in a production-cutback deal spearheaded by the Organization of the Petroleum Exporting Countries, Tehran is said to be aggressively seeking fresh investment to help jumpstart its antiquated petroleum industry. A reinstatement of sanctions would derail its plan.
Along with the geopolitical and policy upsides, analysts say the apparent success of the output-cut agreement forged late last year is also fueling optimism that oil-producing nations are serious about slowing down their production to boost global oil prices.
"The steadier tone in oil we are calling for is partly attributable to the fact that OPEC seems to have pulled a rather respectable production deal so far," said financial-service company INTL FCstone, suggesting the cartel and the 11 other non-OPEC producers have reached a 75% compliance level. OPEC's January production data will be released on Monday.
A downside, however, is the steady improvement in U.S. oil drilling. Data from oilfield-service firm Baker Hughes showed American oil operators added 17 active oil rigs there last week, bringing the total to 583. Analysts warn that as U.S. oil companies are returning to oil patches, OPEC's effort to push prices higher by reducing the global supply could be undermined.
Nymex reformulated gasoline blendstock for March--the benchmark gasoline contract--rose 132 points to $1.5669 a gallon, while March diesel traded at $1.6706, 55 points higher.
ICE gasoil for February changed hands at $0.00 a metric ton, unchanged from Friday's settlement.
(END) Dow Jones Newswires
February 05, 2017 23:00 ET (04:00 GMT)
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