29 Mar 2024
Monday 21 May 2018 - 16:55
Story Code : 305952

Oil gains near $72 as Venezuelan risk adds to Iran concerns

Bloomberg |andOil advanced toward $72 a barrel as Venezuelas election results escalated the risk of U.S. sanctions against the OPEC nation, adding to mounting concerns about supply following curbs against Iran.

Futures in New York rose as much as 0.9 percent. President Nicolas Maduro won the elections in Venezuela, increasing the prospect of U.S. sanctions that could curb the nations already struggling energy industry. Separately, U.S. Treasury Secretary Steven Mnuchin said his nation and China are putting the trade war on hold, easing any risk to oil demand.

Crude in both New York and London are heading for a third monthly gain after geopolitical tensions in the Middle East and U.S. sanctions on Iran pushed it to levels not seen for more than three years. Venezuelas slumping production, and potential disruptions from Iran, are the biggest current risks to the oil market, but the International Energy Agency said it is in talks with producing nations about their ability to step in to ease any potential supply shortfall.

Venezuela is the major risk for the oil markets for the next weeks or months to come, IEA Executive Director Fatih Birol said in a Bloomberg TV interview. I have been discussing with key oil ministers from the major oil-producing countries and expect them to contribute to the solution of this looming problem in the markets, whether its lost supply from Venezuela or Iran.

West Texas Intermediate for June delivery, which expires on Tuesday, increased 20 cents to $71.48 a barrel on the New York Mercantile Exchange at 10:53 a.m. in London. Total volume traded was about 22 percent below the 100-day average. The more actively traded July contract rose 22 cents to $71.59.

Brent futures for July settlement were 12 cents higher at $78.63 a barrel on the London-based ICE Futures Europe exchange, and traded at a $7.05 premium to WTI for the same month.

Yuan-denominated futures dropped 0.8 percent to 482.4 yuan a barrel on the Shanghai International Energy Exchange.

Trade Truce

America and China agreed to substantially reduce the U.S.s trade deficit in goods with the Asian nation after two days of negotiations. Both sides agreed on meaningful increases in U.S. energy and agriculture exports, which soothed the nerves of investors worried that the two major economies were on the verge of an all-out trade war.

To read about the commodity winners from the U.S.-China trade truce, click here

Oil production in Venezuela, which holds the worlds biggest known crude reserves, has tumbled amid an escalating economic crisis. The supply concerns are compounded by U.S. President Donald Trump reimposing sanctions on Iran, the third-largest producer in the Organization of Petroleum Exporting Countries.

Other oil-market news:

  • Iran said it has strategies to replace customers who choose to halt oil purchases, and it will use new methods to maintain its level of global crude supply, the countrys oil ministry news service Shana reported, citing the spokesman of the parliaments energy commission.

  • Hedge funds reduced their net-long positions -- the difference between bets on a price increase and wagers on a drop -- on Brent futures for a fifth consecutive week, the longest stretch of declines since November 2016, according to ICE Futures Europe data.

  • Citigroup Inc. raised its base-case 2018 oil-price forecast by $10 to an average of $75 a barrel, analysts including Ed Morse said in an emailed report Monday.

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