Oil's back to posting a monthly gain as geopolitical risks rise

Date:2018-03-30 09:10:30

LONDON (Bloomberg) -- The prospect of flaring geopolitical tensions and falling U.S. oil stockpiles are helping lift crude again, after a five-month winning streak was broken in February.

Futures in New York are up 5% in March, recouping last month’s losses. U.S. President Donald Trump picking two Iran hawks for his national security team has spurred speculation that sanctions may be re-imposed on the OPEC member, curbing its oil exports.

The signals coming from the world’s biggest oil market are less uniformly bullish. U.S. crude production rose every week in March as drillers deployed more rigs. Prices declined on Wednesday after a government report showed U.S. crude inventories increased more than analysts expected, although that was offset by drops in product stockpiles.

“The latest weekly inventory report was not bearish,” said PVM Oil Associates analyst Tamas Varga.

WTI for May delivery rose as much as $0.47 to $64.85/bbl on the New York Mercantile Exchange, and was at $64.47 in London. Total volume traded was about 41% below the 100-day average.

Brent for May settlement, which expires Thursday, slipped $0.08 to $69.45/bbl on the London-based ICE Futures Europe exchange. The more-active June contract fell $0.10 to $68.66. The global benchmark traded at a $4.96 premium to WTI. The European bourse along with Nymex will be closed on Friday for the Good Friday holiday.

Yuan-denominated oil futures on the Shanghai International Energy Exchange lost 1.8% to 406.8 yuan/bbl.

Geopolitical Tension

Trump this month picked John Bolton as national security adviser and Mike Pompeo as secretary of state, two officials who have advocated regime change in Iran, making a sharply hawkish foreign-policy turn. That’s led to speculation that the U.S. will withdraw from a deal between western powers and the Persian Gulf state under which sanctions were removed on Iran in return for a curbing of its nuclear program.

Further worries surrounding the Middle East have emerged after Saudi Arabia, the world’s top crude exporter, intercepted missiles fired by Tehran-backed Houthi rebels in Yemen.

While investors are assessing the political landscape, oil producers are persisting in their efforts to limit supplies. Iraq’s al-Luaibi said some producers suggested extending their cuts for three months and others for six months after their planned expiration at the end of this year.

Oil Market News

Drilling for crude in the briny deep could be poised for a major comeback as oil majors including Exxon Mobil and BP are set to boost exploration wells by more than 50% this year, according to 1Derrick, an oil and gas research company. The burden of a quarter century of expectations is weighing on China’s oil futures with data from the first few days of the trading signaling that futures have a ways to go for success. Gasoline futures rose 0.2% on Thursday, heading for a gain of almost 15% this month.

TypeInfo: Industry News

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