By : Christopher Alessi
Wall Street Journal, March 27, 2018 – Oil prices wavered between gains and losses Tuesday, as participants gauged increasing supply against geopolitical risks to producers.
Light, sweet crude was recently down 20 cents, or 0.3%, at $65.35 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 7 cents, or 0.1%, to $70.19 a barrel.
In recent days, prices have been pulled between potential disruptions to production in Iran and steadily increasing output from U.S. shale producers.
“Newly heightened geopolitical risks of a more hawkish U.S. policy toward Iran…clearly raises the likelihood of oil trade disruptions and with it upside risks to oil prices in the near term,” said Ehsan Khoman, head of research for the Middle East at Bank of Tokyo-Mitsubishi UFJ in a note Tuesday.
A withdrawal by the U.S. from a 2015 international agreement to curb Iran’s nuclear program would result in the reimposition of economic sanctions on Iran.
In such a scenario, “at minimum, we view that 250,000 to 350,000 barrels a day of Iranian crude is at risk of being disrupted,” Mr. Khoman said.
Georgi Slavov, head of research at brokerage Marex Spectron, noted that “at a time when demand is relatively strong, any news on limiting supply like sanctions on a major oil producer [such as Iran] will have a positive impact on the market.”
Mr. Slavov said crude prices have also been supported by “the utilization of inventory capacity” outside the U.S., which is helping to tighten supply globally.
At the same time, strong compliance with the Organization of the Petroleum Exporting Countries’ agreement to hold back crude output by 1.8 million barrels a day has supported prices. OPEC and 10 producers outside the cartel, including Russia, have been curbing production since the start of last year in an effort to rein in a supply glut.
“Despite increasing U.S. shale output, prices remain stable due to…OPEC compliance and increasing geopolitical premium,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd.
Oil-market observers are looking ahead to weekly U.S. inventory data Tuesday from the American Petroleum Institute, an industry group, and official government data due Wednesday morning.
Gasoline futures traded near flat at $2.0097 a gallon and diesel futures rose 0.5% to $2.0240 a gallon.
