Oil rises to March high on Middle East tensions,
Venezuela concerns
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[March 20, 2018]
By Amanda Cooper
LONDON (Reuters) - Oil rose on Tuesday to
its highest level so far this month, lifted by tension in the Middle
East and the possibility of further falls in Venezuelan output.
Brent futures <LCOc1> were up 98 cents at $67.03 a barrel by 1212 GMT,
around their highest level since late February. U.S. West Texas
Intermediate (WTI) crude futures <CLc1> were up 87 cents at $62.93 a
barrel.
"The move today is more to do with geopolitical tensions than underlying
fundamentals, but I don't expect that to last," PVM Oil Associates
strategist Tamas Varga said.
Saudi Arabia called the 2015 nuclear deal between Iran and world powers
a "flawed agreement" on Monday, on the eve of a meeting between the
Saudi crown prince and U.S. President Donald Trump. Both are highly
critical of Iran.
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.
"Tensions between Saudi Arabia and Iran gave prices some support,"
Sukrit Vijayakar, director of energy consultancy Trifecta, said in a
note.
(For a graphic on Russia vs Saudi vs U.S. oil production click http://reut.rs/2G7AK80)
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 an economic crisis, also supported oil markets.
The International Energy Agency said last week Venezuela was "vulnerable
to an accelerated decline" and said such a disruption could tip global
markets into deficit.
PVM's Varga said Venezuela was a potential source of supply disruption,
but he said the bigger challenge for OPEC and its allies was ensuring
their efforts to balance the market through output curbs was not
undermined by rising production elsewhere.
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A motorist holds a fuel pump at a Gulf petrol station in London
April 18, 2006. REUTERS/Luke MacGregor/File Photo
(For a graphic on U.S. vs Venezuela oil production since 2005 click http://reut.rs/2FWXdBH)
Output has climbed sharply in the United States, Canada and Brazil, as they ramp
up production to benefit from higher crude prices that have been buoyed by the
cuts made by the Organization of the Petroleum Exporting Countries, Russia and
their allies. The production rise has capped oil price gains.
Appetite for U.S. 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 U.S. oil. Brent is the benchmark for several Middle East and other
global crudes.
"Spot Brent crude oil prices averaged $3.36 per barrel more than WTI prices in
2017 compared with just $0.40 per barrel more in 2016, providing a price
incentive to export U.S. crude oil into the international market," said Matt
Stanley, a fuel broker at Freight Investor Services International in a note.
The premium of Brent crude to WTI rose above $4 a barrel on Tuesday, its widest
in a month.
(For a graphic on World oil supply and demand balance click http://reut.rs/2FIxGvP)
(Additional reporting by Henning Gloystein in Singapore; Editing by Edmund
Blair)
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