Oil decline continues as US - Iran tensions abate and supply increases

Oil decline continues as US - Iran tensions abate and supply increases

Brent, the global benchmark for crude, was down 65 cents, or 1 per cent, at $64.33 per barrel by 11:37 a.m. EST (15:37 GMT), continuing its slide from the middle of last week when the United States and Iran moved away from an outright war after Tehran fired missiles at U.S. airbases in Iraq. The global crude benchmark traded at a $6.04 premium to West Texas Intermediate (WTI) for the same month.

On the demand side, the USA and China are set to sign their limited trade deal this week, which may improve sentiment.

Crude oil briefly jumped above $70/bbl (Brent) on two occasions this past week as concerns over a potential war in the Middle East, raised the spectre of widespread damage to oil supply and spare capacity.

Backwardation in Brent LCoC1-LCOc2, a market structure where prices for near-term contracts are higher than those for later contracts, is now at 72 cents per barrel, from 84 cent a week earlier, whereas the WTI backwardation CLc1-CLc2 is at 4 cents a barrel from 23 cents last week. "The price fall came as market players concluded that despite the significant rise in tension between the U.S. and Iran, oil production is unlikely to be affected", said oil broker PVM's Tamas Varga.

A U.S. -China trade deal is due to be signed in Washington on Wednesday.

Still, with traders already pricing in the signing of the deal, there is more downside risk to prices, said Michael McCarthy, chief market strategist at CMC Markets.

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Prince Abdulaziz bin Salman, energy minister for the kingdom, told delegates at an energy conference that, "As tension remains high in our region, Saudi Arabia will continue to do all it can do to ensure stable oil markets".

According to Reuters, the increase in tensions across the Middle East after the killing of an Iranian general by a US air strike, hedge fund managers added only modestly to their bullish position in petroleum last week.

The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration (EIA), an agency of the US Department of Energy.

Oil prices surged to their highest in nearly four months after a United States drone strike killed an Iranian commander on January 3 and Iran retaliated with missiles launched against U.S. bases in Iraq.

Regardless of trade wars, China's crude oil imports in 2019 surged 9.5% from a year earlier, setting a record for a 17th straight year, as demand growth from refineries built last year propelled purchases by the world's top importer, data showed.

On January 13, oil prices edged down as fears of a conflict between the United States and Iran eased.

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