Oil edges up on Middle East tension, global market recovery

Oil Stock Markets

Oil prices edged up on Tuesday, supported by concerns that tensions in the Middle East could lead to supply disruptions. 

Hopes that behind-the-scenes talks between the United States and China will prevent a looming trade war between the world’s two biggest economies also supported global markets, including crude oil futures. 

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $65.69 a barrel at 0602 GMT, up 14 cents, or 0.2 percent, from their previous close. 

Brent crude futures LCOc1 were at $70.20 per barrel, up 8 cents, or 0.1 percent.

Iraq, the second biggest producer within the Organization of the Petroleum Exporting Countries (OPEC) said on Monday that it also supports the producer cartel’s agreement to cut oil output. 

OPEC, together with a group of non-OPEC producers led by Russia, started withholding production in 2017 in order to prop up prices. The deal to cut is scheduled to last through 2018, and there has been recent support by OPEC’s de-facto leader Saudi Arabia to extend the cuts into 2019.

However, some traders cautioned that such a moved faced opposition. 

U.S. crude production - thanks largely to shale, or tight oil drilling - has already jumped by almost a quarter since mid-2016, to 10.4 million barrels per day (bpd) C-OUT-T-EIA, taking it past top exporter Saudi Arabia and within reach of top producer Russia, which pumps around 11 million bpd. 

“For oil, we expect the supply deficit of the past couple of quarters to give way to a surplus, driven largely by strong growth in U.S. tight oil supply,” Britain’s Barclays bank said on Tuesday.

In Asia, Shanghai crude oil futures saw their second day of trading <0#ISC:>, repeating Monday’s high volumes. 

Shanghai crude ISCU8 fell 1.9 percent to 425.7 yuan ($67.93) per barrel by 0602 GMT from the previous settlement of 433.8 yuan ($69.31). 

In dollar-terms, Chinese crude prices are trading between Brent and WTI.

Some traders that the influx of foreign oil money into Shanghai crude futures also contributed to the rise in the yuan to a 7-week high on Tuesday against the dollar CNY=PBOC.