On Tuesday, oil prices remained steady as investors took profit after last week’s gains. Prices were supported by possible US sanctions could restrict Iranian oil exports and falling production in embattled Venezuela. Pioneer Natural Resources photo.
Oil prices fell slightly on Tuesday as geopolitical concerns wane
Oil prices were steady on Tuesday despite profit taking by investors after last week’s rally which saw crude prices jump to three-year highs.
During the session, prices were buoyed by concerns over possible supply disruption in the future as the United States mulls sanctions against Iran and Venezuela continues to be mired in political and social unrest.
By 1:46 p.m., EDT, Brent crude was down by 14 cents to $71.28/barrel and US WTI was even, sitting at $66.22/barrel. The Canadian Crude Index slipped by 1 cent to $48.77.
“We’re starting to see a little of the premium come off from geopolitics, and the focus is shifting to inventories,” Bill Baruch, president of Blue Line Futures told Reuters.
Last week, benchmark Brent hit a high of $73.09, the highest since December 2014. The increase was attributed to rising tensions in the Middle East as well as the Trump administration’s threat to renew US sanctions against Iran and declining Venezuelan production.
“The rally upwards was purely on geopolitical risk and if now we haven’t had any further stimulus, we’re seeing prices slip off a bit,” Natixis commodities strategist, Joel Hancock, told Reuters.
According to Reuters, analysts expect uncertainty over US policy concerning Iran to continue to underpin prices until May 12, the deadline President Trump has given to Congress and European allies to “fix” the Iran nuclear deal.
Should the US not renew sanctions relief for Iran, the fifth largest crude producer in the world could encounter difficulties exporting its oil.
Last week, prices traded with a focus on the chemical attacks in Syria and the potential long-term ramifications around the comments from Saudi Arabia, Qatar, France, Great Britain and the United States that they would be involved in the response, according to Drillinginfo.
This forced Russia to respond aggressively, saying U.S. military action could result in grave repercussions.
However, there are other supportive elements to the market; with Venezuelan production declining, the potential of the U.S. withdrawing from the Iran nuclear deal (increasing the likelihood of sanctions lowering crude output) and the public expectation of $80 crude prices for the Saudi Aramco IPO, the market took its attention off the Syria issue and narrowed the definition from the tariff war expectations.
Rising demand and the OPEC supply cut agreement have helped make oil one of the top-performing commodities this year. Up by 7 per cent, oil price gains are behind wheat and corn which have both increased by nearly 10 per cent.
However, with data on crude stocks at the Cushing, Oklahoma, delivery hub to be released Tuesday and Wednesday, enthusiasm for oil prices may be dampened.
“We’ve seen that front May-June spread in WTI swing back into contango today. And that’s somewhat of a bearish…it implies a continued up trend in Cushing crude supply,” Jim Ritterbusch, president of Ritterbusch and Associates told Reuters.
“There’s not much volatility today, as we wait for API and EIA data,” Ritterbusch said.
Later on Tuesday, the American Petroleum Institute releases its crude stocks data and on Wednesday, the US Energy Information Administration releases its official government data on crude production and inventories.