Oil rose on Tuesday, holding above $70 a barrel for a third day, supported by concerns that tensions in the Middle East could lead to supply disruptions, although with global output rising fast, investors remained cautious.
Brent crude futures LCOc1 were up 28 cents on the day at$70.40 a barrel by 0848 GMT, while West Texas Intermediate (WTI) crude futures CLc1 were up 19 cents at $65.74 a barrel.
Geopolitics and expectations of the world’s largest exporters controlling supply have helped push Brent above $70 this year for the second time since late 2014, but analysts said this strength may not persist for long.
“The price strength of the last couple of weeks is down to two factors. The first one is a stable OPEC output level which leads to impressive compliance (with an oil supply-cutting deal). The second one is supply-side geopolitical developments in Venezuela, Libya and Iran, the most acute of which is Iran.”
The United States has threatened to withdraw from a nuclear deal that Iran signed with six nations in 2015, which expires in May this year, raising the chance that it may impose sanctions on Tehran and hinder oil exports.
The Organization of the Petroleum Exporting Countries (OPEC) together with a group of non-OPEC producers led by Russia, has curtailed production since January 2017 to prop up prices.
The deal is scheduled to last through 2018, and there has been recent support by OPEC’s de-facto leader Saudi Arabia to extend the cuts into 2019.
Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, said there was “considerable resistance” to extending the deal as current, or higher, prices could entice even more U.S. shale producers to come back online.
In Asia, Shanghai crude futures ISCU8 fell over 2 percent in their second day of trading to 424 yuan ($67.85) per barrel from a last settlement of 433.8 yuan ($69.41).
