Oil prices rise on Middle East tension, global market recovery

Oil prices rose on Tuesday, pushed up by concerns that tensions in the Middle East could lead to supply disruptions.

Hopes that behind-the-scenes talks between the United States and China will prevent a looming trade war between the world’s two biggest economies also supported global markets, including crude oil futures.

U.S. West Texas Intermediate (WTI) crude futures were at $65.71 a barrel at 0142 GMT, up 16 cents, or 0.2 percent, from their previous close.

Brent crude futures were at $70.25 per barrel, up 13 cents, or 0.2 percent.

James Mick, Managing Director and Energy Portfolio Manager with asset management firm Tortoise, said “rising geopolitical tensions” were driving up oil prices. The biggest risk was that the United States could re-introduce sanctions on Iran.

“Crude also received support from OPEC members as Saudi Arabia and Russia both reiterated goals to extend the production cut agreement,” Mick said. Iraq, the second biggest producer within the Organization of the Petroleum Exporting Countries (OPEC) said on Monday that it also supports the producer cartel’s agreement to cut oil output.

OPEC, together with a group of non-OPEC producers led by Russia, started withholding production in 2017 in order to prop up prices. The deal to cut is scheduled to last through 2018, and there has been recent support by OPEC’s de-facto leader Saudi Arabia to extend the cuts into 2019.

However, some traders cautioned that such a moved faced opposition.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore said there was “considerable resistance” as current or higher prices opened the possibility that even more U.S. shale producers could come back online.