July 30, 2018 by Grant Smith
Oil rose above $70 a barrel in New York for the first time in more than a week as a weaker dollar boosted the appeal of commodities and concerns over global supply disruptions persisted.
West Texas Intermediate futures added as much as 2.2 percent following a retreat of 2.5 percent last week. Three oil fields in the North Sea wound down output early on Monday as industrial action began, a labor union said. Tensions in the Middle East remain high as the U.S. reimposes sanctions on Iran, while Saudi Arabia halted shipments via a key Red Sea shipping lane last week after two tankers were attacked by Yemen’s Houthi militia.
Oil has declined almost 5.5 percent this month on concerns that a trade war between the U.S. and China will hurt the global economic growth that underpins energy demand. Yet the losses have been capped as President Donald Trump seeks to curtail oil exports from Iran after quitting an agreement that oversees the Islamic Republic’s nuclear program. Barclays Plc warned of “ significant upside risk” for prices in the fourth quarter as Trump’s policy takes effect.
“Geopolitical risk rose last week from left and right of the Arab Peninsula,” with the attack on Saudi tankers and growing tensions between the U.S. and Iran, said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “An escalation of either of the conflicts would have a devastating impact on global oil supply.”
WTI crude for September delivery rose as much as $1.48 to $70.17 a barrel on the New York Mercantile Exchange, and traded at $70 as of 1:08 p.m. London time. The contract fell 2.5 percent to $68.69 last week. Total volume traded Monday was 18 percent below the 100-day average.
Brent for September settlement traded at $74.79 a barrel on the London-based ICE Futures Europe exchange, up 22 cents, and was at a $4.80 premium to WTI. The global benchmark crude climbed 1.7 percent last week to $74.29.
The dollar slipped 0.3 percent against the euro to $1.1686, boosting the appeal of assets such as commodities priced in the U.S. currency.
Demand for crude will stay strong amid “surprisingly resilient” profit margins for refiners, according to consultants JBC Energy GmbH in Vienna. Crack spreads for turning crude into gasoline hit the highest in more than a month in New York, and the highest in 11 months in Europe.
Other oil-market news:
While OPEC and its allies could discuss an oil-supply increase higher than the 1 million barrels a day agreed at the June meeting, there are currently no talks on that, Russian Energy Minister Alexander Novak said in Johannesburg. Oil bulls are venturing back into the market as global conflict sparks concern that supply disruptions will leave buyers scrambling for barrels. A 12-hour stoppage at Total SA’s Alwyn, Dunbar and Elgin oil and gas fields is set to go ahead on Monday, Unite union regional officer Wullie Wallace said in an email. U.S. federal regulators said their proposal to roll back U.S. mileage targets would increase the nation’s fuel consumption by 500,000 barrels a day. U.S. working oil rigs rose by three to 861 last week, according to Baker Hughes data.