Oil prices turned higher Tuesday, rebounding from losses seen
over the past two sessions as tensions in the Middle East
appeared to ease and traders bet that weekly data from the U.S.
government will reveal a decline in domestic crude stockpiles
for a ninth-straight week.
Gains, however, were kept in check as the market continues to
fret over expectations for further gains in production, with
the EIA forecasting a rise in 2018 U.S. crude production to
just over 10 million barrels a day.
On the New York Mercantile Exchange, July West Texas
added 49 cents, or 1%, to trade at $47.89 a
barrel after tapping lows under $47. August Brent crude
on London’s ICE Futures exchange rose 32 cents, or 0.7%,
to $$49.79 a barrel.
“The market has realized geopolitical tension is unlikely to
ratchet up in the Middle East, with Qatar likely wanting to
diffuse the situation rather than escalate it,” Matt Smith,
director of commodity research at ClipperData, told
MarketWatch. “Some buying interest appears to have entered the
fray as we await confirmation of a ninth consecutive draw to
crude stocks from [Wednesday’s] weekly inventory” report.
On Monday, global oil markets saw major
swings, with prices first spiking nearly 2% when Saudi Arabia
and three other Persian Gulf states severed diplomatic ties
with Qatar, a member of the Organization of the Petroleum
Exporting Countries. But the rally lost steam and prices later
sank to a one-month low amid profit-taking pressure and
concerns that the developments may have an effect on the
OPEC-led agreement to cut production, which has been extended
through March of next year.
Reports Tuesday said Qatar is calling for talks to end the
Qatar, though a OPEC nation, is considered a minor crude
“The implications of Qatar exiting from the OPEC production cut
deal would be minimal, given their commitment to cut by 30,000
[barrels a day],” according to Smith. Its “exports to leading
destinations are also likely to be unaffected.”
A survey from S&P Global Platts released Tuesday showed
that OPEC oil output marked their first monthly
climb since October to 32.12 million barrels a day in May.
Meanwhile, the inability of crude prices to stick with earlier
gains underscores market concerns over the unrelenting glut and
the strong production out of the U.S.
In a monthly report issued Tuesday, the EIA raised its production outlook for this
year and next. For 2018, it sees average output of 10.01
million barrels a day, up 0.4% from its previous forecast, and
for 2017, it forecast 9.33 million barrels a day, up 0.3% from
last month’s forecast. The government agency also cut its WTI
and Brent oil-price forecasts for next year.
Traders will be closely watching U.S. weekly oil data due
Wednesday from the Energy Information Administration. The
American Petroleum Institute will issue its own report ahead
that later Tuesday.
Analysts polled by S&P Global Platts forecast a decline of
3.5 million barrels in crude-oil stocks for the week ended June
Back on Nymex, July gasoline
added less than a penny, or 0.6%, to $1.547 a
gallon, while July heating oil
rose under half a cent, or 0.3%, to $1.463 a
July natural gas
traded at $3.028 per million British thermal units, up
4.6 cents, or 1.6%, after falling for a fifth-straight session
Monday to the lowest finish since mid-March.
Market expectations that Thursday’s EIA gas storage report call
for a weekly increase in natural-gas supplies “well above
normal,” with early estimates calling for an addition near 100
billion cubic feet, said Robbie Fraser, commodity analyst at