Oil pares gains, market supported by Iran worries

Futures for September delivery had risen 0.6% to 444.2 yuan per barrel on Friday, gaining 5.7% this month.

Prior to Israeli Prime Minister Benjamin Netanyahu's disclosure of the Iranian filed, French President Emmanuel Macron made a joint announcement with the office of Iranian President Hassan Rouhani in which the two leaders would work together on preserving the 2015 deal.

However, "the increased drilling activity in the United States should not pose any excessive obstacle to oil prices.especially as there are no signs of any solution to the dispute over the nuclear deal with Iran", analysts at Commerzbank said in a morning note.

"I doubt we will see a big sell off before we have some clarity on the Iran nuclear deal", said Torbjorn Kjus, senior oil analyst at DnB markets in Oslo.

OPEC and its partners agreed to cut oil output by 1.8 million barrels per day since January a year ago, an effort which has recorded a 149 percent success, and has boosted prices to $74 per barrel as at Thursday. Total volume traded was about 17 per cent below the 100-day average.

Brent crude futures were last down 2 cents at $74.62 a barrel by 1422 GMT, up from a session low of $73.47.

Trading on the Shanghai International Energy Exchange is closed for a Chinese public holiday.

The risk of the US pulling out of the Iran nuclear deal, resulting in sanctions on the producing nation, has already largely been priced in, underpinning the market, he said.

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Hedge funds and other money managers cut their combined net long position in the six most important futures and options contracts linked to petroleum by six million barrels in the week to April 24.

A strong US dollar also weighed on crude prices, as the USA dollar index hit its highest level since January. The global benchmark crude traded at a $6.43 premium to June WTI.

On Friday, the Baker Hughes rig count in the United States showed a gain of five rigs in the week to April 27, the fourth consecutive weekly rise, bringing the total rig count to 825.

In the USA, working oil rigs rose by five last week to 825, the highest level since March 2015, according to data from Baker Hughes.

But while USA producers are accelerating shale drilling in areas in the United States, higher production has not necessarily translated into stronger refining results for some oil companies.

In a research note, the financial technology and analytics firm claimed that short interest in the U.S./Canadian oil and gas and consumable fuel sector has increased by 27% to $54.9 billion since WTI crude recovered from its year-to-date low of $58.98 in mid-February to reach $67.75.

While US defense secretary Jim Mattis said last week that there's been no decision on the nuclear deal, the nervousness around a potential breakdown in the accord is also spilling over into the physical oil market.

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