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Oil skids on jobs data, Iran talks

London Brent crude fell 73 cents to USD 122.70/bbl, after hitting an intraday low of USD 121.02 and testing below the 50-day MA of USD 121.60. NYMEX crude sank 85 cents to settle at USD 102.46/bbl, after testing below the 100-day MA of USD 101.61 and recovering from a low of USD 100.81.

Oil prices traded lower amid thin volumes on Monday as revived talks on Iran's nuclear program eased fears of supply disruption and on fears slowing US jobs growth may diminish demand for fuel. After being closed on Good Friday, oil markets and Wall Street on Monday had the chance to react to Friday's US nonfarm payrolls report that showed job growth plummeted to 120,000, massively undershooting expectations and logging the smallest gains since October.

Negotiations between Iran and world powers over Tehran's disputed nuclear program are scheduled for April 14 (Saturday) in Istanbul. The resumption of talks, which broke down over a year ago, helped allay concerns about an immediate disruption in supply or the outbreak of conflict. At present, the sanctions appear to be taking a much heavier toll on the country’s oil streams than expected, mainly due to the insurance issue and it cannot be ruled out that this may reduce Iran’s oil shipments to a trickle. That said, we remain convinced that both parties will not budge from their positions and the outcome of these talks will play a pivotal price-driving role both in the short- and long-term outlook. If the talks don’t break down right at the outset, we could see an attempt by Iran to lighten the sanctions in return for some concessions, perhaps even inspections, although we believe the Islamic republic will ultimately refuse to abandon its nuclear program and after about a month this will become plain and prices will heat up again ahead of the July embargo date. In the meantime, Obama and his allies will be working overtime to engineer the release of strategic petroleum reserves right around the July 1 deadline in a bid to mitigate a possible price spike which we view as likely around that time.

Moving forward, we think the oil market will be in wait-and-see mode during this short holiday week ahead of Saturday’s Iranian talks, with moderate negativity prevailing from the fallout over Friday’s job numbers and both benchmarks likely to flirt further with the above-mentioned 50/100-day MAs.