Oil steadies as US-Iran tensions weighed against Russian output view

Oil has jumped about 13 per cent since mid-June as rising tension between the US and Iran spurred concern there could be disruptions to global energy flows or even outright war.
Oil has jumped about 13 per cent since mid-June as rising tension between the US and Iran spurred concern there could be disruptions to global energy flows or even outright war.PHOTO: REUTERS

TOKYO (Bloomberg) - Oil held gains on Tuesday (June 25) after rallying almost 8 per cent in three days as investors weighed mixed signals from the White House on Iran and signs that an extension of the Opec+ production cuts may not be a fait accompli.

Futures in New York edged lower after closing up 0.8 per cent on Monday. President Donald Trump imposed sanctions on Iran's supreme leader, Ayatollah Ali Khamenei, Monday, while also asking in a tweet why the US is protecting the Strait of Hormuz, the world's most important oil choke-point. Russia suggested it's taking wait-and-see approach on the Opec+ output deal before the G-20 summit in Japan at which Trump will meet with Chinese President Xi Jinping.

Oil has jumped about 13 per cent since mid-June as rising tension between the US and Iran spurred concern there could be disruptions to global energy flows or even outright war. That reversed a decline driven by an escalation in the trade conflict between Washington and Beijing. The Trump-Xi meeting this week and the gathering of the Organization of Petroleum Exporting Countries and allied producers days later in Vienna may provide fresh direction for the market.

"Investors are taking a wait-and-see stance, as it's not certain how things will go at the G-20 summit," said Jun Inoue, a senior economist at Mizuho Research Institute Ltd. in Tokyo. "Concern over the economic slowdown means WTI oil prices aren't likely to rise to US$65, or even US$60, unless there's a rapid escalation of tensions in the Middle East or major progress in the trade talks."

West Texas Intermediate for August delivery fell 5 cents, or 0.1 per cent, to US$57.85 a barrel on the New York Mercantile Exchange at 9:41am in Singapore. The contract has rallied 7.7 per cent over the previous three sessions.

Brent for August settlement added 6 cents to US$64.92 a barrel on London's ICE Futures Europe Exchange. It dropped 34 cents, or 0.5 per cent, on Monday. The benchmark crude contract traded at a premium of US$7.07 to WTI.