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Oil rises to 3-week high on Mideast tensions, Venezuela concerns
[NEW YORK] Oil prices climbed to their highest level in three weeks on Tuesday as tension in the Middle East and the possibility of further falls in Venezuelan output helped offset the impact of growing US crude production.
Brent crude futures for May delivery rose US$1.37 to US$67.42 a barrel, a 2.07 per cent gain. The global benchmark rose to US$67.88 during the session, its highest level since late February.
US West Texas Intermediate (WTI) crude futures for April delivery rose US$1.34 to settle at US$63.40 a barrel, a 2.2 per cent gain. WTI traded between US$62.08 and US$63.81.
The more active May US crude futures rose US$1.41 to settle at US$63.54 a barrel.
Prices extended gains in post-settlement trading after data from the American Petroleum Institute showed a surprise draw in US crude inventories.
Stocks fell 2.7 million barrels in the week ended March 16 to 425.3 million barrels, according to the API, compared with analysts' expectations for an increase of 2.6 million barrels. Government inventory data is due on Wednesday at 10.30am EDT (1430 GMT).
Geopolitical risks were top of mind on Tuesday. Saudi Arabia called the 2015 nuclear deal between Iran and world powers a"flawed agreement" on Monday, on the eve of a meeting between Crown Prince Mohammed bin Salman and US President Donald Trump.
Mr Trump has threatened to withdraw the United States from the accord between Tehran and six world powers, raising the prospect of new sanctions that could hurt Iran's oil industry.
"There's an expectation that (Trump and Prince Mohammed) are going to take a harder line on Iran, and that's bringing prices up," said Phil Flynn, a senior energy analyst at Price Futures Group in Chicago.
Worries about falling production in Venezuela, whose output has been halved since 2005 to below 2 million barrels per day (bpd) PRODN-VE due to the country's economic crisis, also supported oil markets.
The International Energy Agency said last week Venezuela was"vulnerable to an accelerated decline" and that the Latin American country could trigger a renewed drawdown in stocks.
However, increased output in the United States, Canada and Brazil has capped oil price gains. US crude oil production C-OUT-T-EIA has risen more than a fifth since mid-2016, to 10.38 million bpd.
The ramped-up production threatens to undermine cuts made by the Organization of the Petroleum Exporting Countries in an effort to draw down a global supply glut.
Appetite for US crude is adding to the headache facing Opec. A widening discount of WTI to Brent crude makes it more attractive for foreign refiners to process US oil. Brent is the benchmark for several Middle East and other global crudes.
The premium of Brent crude to WTI WTCLc1-LCOc1 rose above US$4 a barrel on Tuesday.
Petrol futures on the New York Mercantile Exchange rose 2.1 per cent on Tuesday to settle at US$1.9659 a gallon, the highest level since August 2017.
Data from market intelligence firm Genscape showed petrol inventories in the New York Harbour region fell by about 1.1 million barrels last week, traders who saw the data said.
Heating oil futures rose 2.2 per cent to finish at US$1.9495 a gallon, their highest settle since late February.