Crude Holds Above $71 With Global Turmoil Seen at Bay for Now
(Bloomberg) -- Oil held on to its gains above $71 on Thursday, but the rally lost some steam as concerns over Iran sanctions are countered by Saudi Arabia’s ability to step in with more crude supplies.
Futures closed 0.3 percent higher in New York after trading down for most of the session. Geopolitical events have driven the recent rally, with reports of Israel saying it struck most of Iran’s military facilities inside Syria only adding to tensions over the Iran nuclear accord break-up. Yet, Saudi Arabia said it will work with OPEC and non-OPEC producers to mitigate any impact of a supply shortage following U.S. President Donald Trump’s withdrawal from the deal.
“The concerns surrounding events unfolding in Israel and Syria, with Iran, put a little spark in the market, but we need to see further escalation to really drive it,” Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said.
Crude is trading at its highest level since 2014 after the U.S. told crude buyers to curb purchases from Iran, while American stockpiles shrank. Questions remain over how much oil will be taken off the market as a result. Fitch sees the U.S. move on Iran further boosting Middle East risks. At the same time, UBS Group AG sees Brent crude trading at $80 a barrel in six months and Bank of America Merrill Lynch said oil may rally to $100 next year.
West Texas Intermediate crude for June delivery rose 22 cents to settle at $71.36 a barrel on the New York Mercantile Exchange. Total volume traded Thursday was about 3 percent above the 100-day average.
Brent for July settlement added 26 cents to end the session at $77.47 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $6.16 premium to July WTI.
Saudi Arabia Minister of Energy and Industry Khalid Al-Falih previously said in a post on Twitter that Saudi Arabia is speaking with OPEC, Russia and the U.S. to ensure a stable oil market following Trump’s withdrawal from the Iran nuclear deal.
“There are plenty of players throughout the world, OPEC, non-OPEC, shale, that could easily step in and fill any void here that might be created by a loss of Iranian barrels,” said Brian LaRose, senior technical analyst at ICAP-TA, based in Jersey City, New Jersey. “Now that the dust has settled, folks are realizing maybe this isn’t as bullish as we initially thought.”
Gasoline futures rose 1 percent to settle at $2.1890 a gallon on Thursday. OPEC shipments will rise to 24.97 million barrels a day in the four weeks to May 26 versus the period to April 28, tanker-tracker Oil Movements said in its weekly report. Analysts, traders are bullish on WTI crude futures, according to a Bloomberg survey. Iran said the parties to the nuclear deal must act to preserve the accord. President Donald Trump said Thursday he will meet North Korean leader Kim Jong Un on June 12 in Singapore.
With assistance from Tsuyoshi Inajima, Heesu Lee and Grant Smith. To contact the reporter on this story: Jessica Summers in New York at email@example.com. To contact the editors responsible for this story: David Marino at firstname.lastname@example.org Carlos Caminada, Christine Buurma.
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