Photo caption: Oil
Oil prices gained nearly 2 per cent on Wednesday, as investors worried about escalating tension between Iran and the U.S., which were preparing to resume negotiations, while a weekly report showing large build in crude inventories in the U.S. limited gains.
Brent crude oil futures were up $1.22, or 1.77 per cent, at $70.02 a barrel by 11:47 a.m. ET (1647 GMT). U.S. West Texas Intermediate crude rose $1.21, or nearly 1.89 per cent, to $65.17.
Tension in the Middle East continue to support prices, although there has been no supply disruption so far, said UBS oil analyst Giovanni Staunovo.
On Tuesday, U.S. President Donald Trump said he was considering sending a second aircraft carrier to the Middle East if a deal is not reached with Iran, even as Washington and Tehran prepared to resume talks.
U.S. and Iranian diplomats held indirect talks last week in Oman, amid a regional naval buildup by the U.S. threatening Iran. The date and venue of the next round of U.S.-Iran talks have yet to be announced.
“While rhetoric remains belligerent at times, there are no signs, at least for now, of escalation, and the U.S. President believes that Iran will ultimately want to strike a deal on its nuclear missile programme,” PVM Oil Associates analyst Tamas Varga said in a note.
Also supporting oil prices, U.S. job growth unexpectedly accelerated in January and the unemployment rate fell to 4.3 per cent, the Labor Department said, signaling a healthy economy.
“A resilient labor market underpins demand for transport fuels, petrochemicals and power generation, reducing downside risks to US consumption at a time when macro sentiment had turned cautious,” Rystad Energy said in a note, adding that “labor market stability reinforces the view that the demand picture is firming up.”
Limiting price gains, the U.S. crude inventories rose by 8.5 million barrels to 428.8 million barrels last week, the Energy Information Administration said, far exceeding analysts’ expectations in a Reuters poll for a 793,000-barrel rise.
“Domestic production came back with a vengeance and not that far off the all-time record,” said Robert Yawger, director of energy futures at Mizuho.
In the wider market, OPEC left its supply-demand expectations for the oil market largely unchanged in its monthly report, but highlighted that global oil demand for the wider group’s crude will drop by 400,000 bpd in the second quarter compared to the first.
Russian oil production edged down around 0.6 per cent in January from December, per the report.
Egypt has directed international oil companies to double production by 2030, with existing contracts due to be revised to spur new investment, Energean International’s country manager for Egypt told Reuters on Tuesday.
=== Reuters ===
