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Oil hovers near 2014 peak as geopolitics vye with U.S. supply

Reuters  |  LONDON 

By Cooper

LONDON (Reuters) - held near its highest in nearly three years on Wednesday, supported by political tension in the Middle East, although evidence of rising U.S. crude supply acted as a counterbalance.

Brent crude has gained 5.7 percent this week, rising to $71.34 a barrel on Tuesday, the highest since late 2014, although the price has since fallen back and was $70.98 a barrel by 0907 GMT, down 6 cents.

U.S. crude futures were at $65.55 a barrel, up 4 cents on the day.

The and its allies are considering air strikes against Syrian Bashar al-Assad's forces following a

Pan-European air traffic control agency said late on Tuesday that air-to-ground and/or cruise missiles could be used within the next 72 hours, warning of intermittent disruption of

is not a significant producer, but any sign of conflict in the region tends to trigger concern about potential disruption to crude flows across the wider Middle East, home to some of the world's biggest producers.

There are also concerns that the could renew sanctions against

"The focus right now is definitely on a possible military strike against Syria," said.

"We think the fundamentals do not justify the current price, but unfortunately, the market is focusing more on the and ignoring some of the warning signs, especially the hike in U.S. production."

Chinese on Tuesday sounded a conciliatory note on trade, which soothed some of the concern about an all-out trade conflict between his country and the United States, after both countries imposed tariffs on key imports, which in turn has also supported this week.

"We have upped our Brent forecast to $67.50 a barrel, from $66 in our last price update in February. We see price risks to the upside on geopolitical risk," said in a note.

said on Wednesday his country would not sit by and let another supply glut surface, implying that the of the Organization of the Petroleum Exporting Countries (OPEC) would continue to withhold supply.

Not all market indicators suggest the price will continue to rally strongly, analysts said.

U.S. crude inventories rose by 1.8 million barrels in the week to April 6 to 429.1 million, according to a report by the (API) on Tuesday, compared with analysts' expectations for a decrease of 189,000 barrels.

The (EIA) said on Tuesday that it expects domestic production in 2019 to rise by more than previously expected, driven largely by growing U.S. shale output.

(Additional reporting by in SINGAPORE; Editing by Jane Merriman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, April 11 2018. 16:42 IST