Picture: REUTERS/RAMZI BOUDINA
Picture: REUTERS/RAMZI BOUDINA

London — Oil rose above $64 a barrel on Tuesday as Opec supply cuts and Middle East tensions outweighed the US-China trade dispute that is dragging on the global economy and oil demand.

Opec and its allies last week agreed to extend their supply-cutting deal until March 2020. Brent has risen almost 20% in 2019 supported by the pact and also tension in the Middle East, especially concerns about Iran's nuclear programme.

Brent crude, the global benchmark, rose 38 US cents to $64.49 a barrel by 9.10am GMT. US West Texas Intermediate crude was up 20c to $57.86.

“Opec and its allies are doing their best to support the market,” PVM analyst Tamas Varga said.

“Oil prices are to hold up reasonably well during coming months or at least they are not to fall out of bed.”

Rising tension between Iran and the US have brought the two countries close to conflict. In June, President Donald Trump called off air strikes at the last minute in retaliation for Iran shooting down a US drone.

Iran on Monday threatened to restart deactivated centrifuges and step up its enrichment of uranium to 20% in a move that further threatens the 2015 nuclear agreement that Washington abandoned in 2018.

Oil also gained support from reports expected to show a drop in US crude inventories.

US crude stockpiles are forecast to fall 3.6-million barrels in a fourth consecutive weekly decline. The first of this week's two supply reports is due at 8.30pm GMT from the American Petroleum Institute, an industry group.

However, while supply and security concerns supported the market, oil prices remained under pressure with the US-China trade war dampening prospects for global economic growth.

The world's two largest oil consumers are set to relaunch trade talks this week, although a year after the dispute began there are few signs their differences have narrowed.

“Demand is soft,” Petromatrix analyst Olivier Jakob said. “Generally, market participants find the market is fairly well balanced and don't seem to be too concerned about any potential supply disruptions.”

In a sign that global trade tension is taking a toll on corporate investment, figures on Monday showed Japan's core machinery orders fell by the most in eight months. The country is the world's fourth-largest user of crude.

Reuters