Oil started the week strongly after Saudi Arabia and other OPEC+ members signaled intentions to keep supplies constrained for the rest of the year, while US tensions with Iran ratcheted up as US President Donald Trump threatened the country in a tweet.
Futures in New York rose as much as 1.7 percent, following a 1.8 percent gain last week.
Saudi Arabian Minister of Energy and Industry Khalid al-Falih urged members of OPEC+ — a 24-member coalition informally referred to as the “Vienna Group” — at meeting in Jeddah to “stay the course” on output cuts.
Meanwhile, just weeks after the US increased sanctions pressure on Iranian crude exports, Trump tweeted: “If Iran wants to fight, that will be the official end of Iran.”
Oil has rallied about 40 percent this year as supply cuts have outweighed concerns about slowing demand growth caused by trade tensions between the US and China. Saudi Arabia and fellow oil producers have to balance their desire to maintain high crude prices with the need to fill any supply gaps caused by rising geopolitical risks in the Middle East and disruptions in Venezuela, Libya and Iran.
“Crude prices are rising because investors view OPEC wants to tighten supply and demand to maintain current prices,” Japan Oil, Gas and Metals National Corp lead economist Takayuki Nogami said by telephone from Tokyo.
“While the outcome of the OPEC+ meeting was in line with expectations, it’s still uncertain” what the producers will ultimately decide on production cuts in June, Nogami said.
West Texas Intermediate crude for delivery next month rose as much as US$1.05 to reach US$63.81 per barrel on the New York Mercantile Exchange and was trading at US$63.53 at 3:04pm in Singapore. The contract added 1.8 percent last week, the biggest weekly increase since early last month. The contract expires after end of trading today. The more actively traded July contract rose to as high as US$63.96.
Brent for July settlement rose US$0.97 to reach US$73.18 per barrel on the London-based ICE Futures Europe exchange. The contract added 2.3 percent last week. The global crude benchmark traded at a US$9.44 premium to West Texas Intermediate for the same month.
“We need to stay the course, and do that for the weeks and months to come,” al-Falih told reporters after the meeting in Jeddah.
The kingdom “isn’t fooled” by crude prices and believes the market is still fragile, he said.
Meanwhile, Russian Minister of Energy Alexander Novak sent mixed signals.
Russia, the most important non-OPEC partner in the coalition, is ready to consider easing production cuts if the market needs more crude, Novak said.
Still, Russia would comply with any agreed output limit in the second half of this year, he said.
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