Oil prices seesawed early on Tuesday, supported by indications that OPEC may opt for prolonging the production cut deal beyond June, while tensions between the U.S. and Iran continued to feed concern about oil supply flows from the Middle East.
As of 10:23 a.m. EDT on Tuesday, WTI Crude was down 0.25 percent at $63.05, and Brent Crude was trading up 0.03 percent, at $71.99.
In recent days, escalating tensions in the Middle East and signals from OPEC and its de facto leader Saudi Arabia that the cartel and its allies could decide to continue restricting some production through the end of this year have been trumping concerns about the state of the global economy and oil demand stemming from the U.S.-China trade war.
Reports have it that OPEC and its partners may decide to keep the oil production cuts until the end of the year as the cartel fears a steep price drop if cuts were to be reversed within the next couple of months, according to delegates at a Sunday panel meeting of the extended producers’ club who spoke to The Wall Street Journal.
Saudi Arabia’s Energy Minister Khalid al-Falih told Reuters on Sunday that he doesn’t see an oil supply shortage on the market currently, as inventories are still rising. OPEC will be responsive to the market needs, al-Falih said, but reiterated that data still suggests that inventories are rising, especially in the United States.
In considering the next step of its oil supply management policy, OPEC will have to factor in the heightened tension between the U.S. and Iran and in the Middle East as a whole.
“If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!,” U.S. President Donald Trump tweeted on Sunday, following up with remarks on Monday that “I think Iran would be making a very big mistake if they did anything. If they do something, it’ll be met with great force. But we have no indication that they will.”
The tension between Iran and the U.S. and in the Middle East has flared up in recent weeks after the U.S. ended all sanction waivers for Iranian oil exports, aiming to drive Iran’s oil sales to zero. Iran claims the U.S. can’t and won’t drive its exports to zero and accuses the United States and its regional allies Saudi Arabia and the UAE of using oil as a political tool. Saudi Arabia reported last week attacks on its oil infrastructure as the proxy conflict escalates between Saudi Arabia and its Arab allies on the one side, and Iran and its allies on the other.
By Tsvetana Paraskova for Oilprice.com
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