Concern about supply disruptions lifts oil
Brent rises as spreading conflict in the Middle East, renewed US sanctions against Iran and falling output from Venezuela indicate supply may be affected
Singapore — Oil prices rose on Tuesday amid concern there could be a high risk of disruptions to supply, especially in the Middle East.
Brent crude oil futures were at $71.69 a barrel at 3.26am GMT, up 27c, or 0.4%, from their last close.
US West Texas Intermediate (WTI) crude futures were up 32c, or 0.5%, at $66.54 a barrel.
Traders said oil markets were receiving general support due to a sense that there were high risks of supply disruptions, including a potentially spreading conflict in the Middle East, renewed US sanctions against Iran and falling output as a result of political and economic crisis in Venezuela.
"With so many potential supply disruptors in play and few signs that the current market upheaval will end any time soon, traders continue to pay the geopolitical risk premium," said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
"Oil prices should remain bid … at least through the Iran nuclear deal deadline [May 12] if not for the remainder of 2018," he added.
Oil markets have generally been well supported this year, with Brent up by about 16% from its 2018-low in February, due to healthy demand, which comes as producer cartel Opec leads supply cuts aimed at tightening the market and propping up prices.
US output soars
Beyond Opec’s production restraint and concern about supply disruptions, the main market driver in oil has been the US, where crude production has soared by almost a quarter since mid-2016 to 10.53-million barrels a day, largely thanks to a booming shale industry.
Only Russia pumps out more oil currently at almost 11-million barrels a day.
"US shale producers have been quietly capitalising on higher oil prices with increasing rig counts seen. A staggering amount of 73 rotary rigs have been placed since January 2018," said Benjamin Lu of Phillip Futures in a note on Tuesday.
"As such, we expect a softening in crude oil prices as markets adjust from a bullish streak," he added.
The American Petroleum Institute (API) is due to publish weekly US fuel inventory data later on Tuesday while official government data, including on production, is due from the US Energy Information Administration (EIA) on Wednesday.