Not-A-Pundit: The Renaissance

NEW YORK (Dow Jones)–Oil prices ended slightly lower Monday, recovering from steep losses triggered by a surprise Iranian diplomatic overture to Washington.

The June crude contract on the New York Mercantile Exchange ended at $69.77 a barrel, down 42 cents, after dropping to a three-week low of $68.25 a barrel.

The June gasoline contract fell 3.70 cents to $2.0036 a gallon. The June heating oil contract ended 16 points lower at $1.9545 a gallon.

The early losses came on news that Iran’s hardline president, Mahmoud Ahmadinejad, had sent a letter to President George W. Bush proposing “new solutions” to the increasingly dangerous standoff between the two countries.

Iran’s top nuclear negotiator, Ali Larijani, said that the letter “could lead to a new diplomatic opening,” but he also warned that it didn’t reflect a softening in Iran’s position.

Larijani refused to disclose the content of the letter, which was expected to reach the White House midday Tuesday, but he said, “Perhaps, it could lead to a new diplomatic opening. It needs to be given some time.”

The conciliatory language raised hopes of a peaceful end to the international dispute over Iran’s disputed nuclear program.

“It was enough to push prices lower,” said Michael Cambria, vice president with brokerage Dimon Oil in New York.

However, it did not take market participants long to conclude that the letter may be little more than a cynical attempt by Iran to block U.S. efforts to step up pressure on the Islamic republic.

Worries that the Iranian nuclear standoff could lead to a disruption in Iran’s oil exports have been blamed for adding as much as $12 to the price oil in recent months.

Mike Fitzpatrick, vice president for risk management at brokerage Fimat USA in New York, called the letter a ploy, a page taken from “the playbook well refined by Col. Qaddafi and Saddam Hussein, of brinkmanship followed by reconciliation, followed by blame reversal, followed by brinkmanship.”

He noted that Iranian officials have defied international calls to halt uranium enrichment and that some members of the Iranian Parliament have broached the possibility of Iran’s withdrawal from the Nuclear Non-Proliferation Treaty if Iran’s “rights” under the accord are not respected.

“Obviously, this dispute is not going to go away easily,” Fitzpatrick said.

The sharp turnaround in prices certainly indicated that the market remains far from relieved over the Iran nuclear standoff.

Chris McCormack, a broker and technical analyst at ABN Amro in New York, described Monday’s price action as “bullish.

“The question is, will the rally carry to new highs above $75.35 (set late last month) or just retract the decline from $74.99″ hit last week, McCormack said.

Separately, U.S. Ambassador to the United Nations John Bolton dismissed the letter as an attempt to break international pressure.

“It doesn’t surprise me that it comes on a day like today in a week when they expect a vote on a resolution. The Iranians are always interested in talking right before somebody puts the squeeze on them,” he said. “Then once the squeeze lets up a little bit… back they go to the pursuit of nuclear weapons.”

Following are prices for selected Nymex and ICE contracts and their comparison to values at the prior day’s settlement. Highs and lows include levels hit in overnight trade.

Prices for crude oil are in dollars a barrel and the change is in cents; prices for Nymex products are in cents a gallon and the changes are in points; prices for ICE gasoil are in dollars a ton and the change is in cents.

Nymex Prices:
Contract Settle Change Vs Low High
Friday
Jun crude oil 69.77 -42 68.25 70.56
Jul crude oil 71.31 -59 70.00 72.23
Jun heating oil 195.45 -16 191.50 197.05
Jul heating oil 197.85 -56 194.50 199.00
Jun gasoline 200.36 -370 196.50 204.49
Jul gasoline 200.34 -369 197.00 204.30
Jun RBOB 224.86 -187 220.00 226.50
Jul RBOB 221.61 -212 216.25 223.00

ICE Prices:
Contract Settle Change Vs Low High
Friday
Jun ICE Brent 70.21 -74 69.06 71.25
Jul ICE Brent 70.80 -70 69.67 71.83
May gasoil 603.75 -875 602.50 619.75
Jun gasoil 606.75 -950 605.50 623.50

By Masood Farivar, Dow Jones Newswires