Published: Thu, March 22, 2018
Finance | By Jaime Brady

Oil Prices Rise On Middle East Tensions, Healthy Demand

Oil Prices Rise On Middle East Tensions, Healthy Demand

Both are highly critical of Iran.

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015.

On the New York Mercantile Exchange, West Texas Intermediate futures were trading up by 1% at $62.75 a barrel.

Futures rose 0.1 percent after climbing to the highest level in more than three weeks on Tuesday.

Looking at United States crude oil stocks, the most recent EIA figures (March 4) showed rising crude oil stocks and falling gasoline inventories. A Bloomberg survey ahead of the government report forecast stockpiles rose by 3.25 million barrels.

"A few things happened", said Jim Ritterbusch, president of Ritterbusch and Associates, referring to the EIA data. Energy companies are said to have seized on the opening, exporting 1.1 million barrels per day to 37 countries in 2017. "And exports were up slightly", he said.

Traders also kept a close eye on the Federal Reserve, which raised interest rates for the first time in 2018 and upgraded its outlook for economic growth after the conclusion of a two-day meeting Wednesday afternoon.

"Tensions between Saudi Arabia and Iran gave prices some support", said Sukrit Vijayakar, director of energy consultancy Trifecta in a note.

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A weaker greenback makes imports of dollar-denominated crude cheaper for countries using other currencies at home, potentially spurring demand.

Oil has swung around this month after registering its worst February decline in half a decade as a global equity market rout spread to commodities.

Meanwhile, concerns that the United States could reimpose sanctions on Iran loom. The resumption of sanctions could drag down oil exports from the Persian Gulf state by 250,000 to 500,000 barrels a day by the end of this year, industry consultant FGE said last week.

"Even though you do see signs that the market is lax on the physical side, do you go aggressively bearish when you have the potential for something happening between the US and Iran?".

Appetite for US crude is adding to the headache facing OPEC.

"We now have production above 10.4 million bpd and it's going to keep rising; and the market is eventually going to have to reckon with that", he said.

"So far, the market is sort of ignoring the increase in production", said Ritterbusch.

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