Oil Prices Slips as Trade Wars Over Shadow Demand Concerns

Oil Prices Slips as Trade Wars Over Shadow Demand Concerns

U.S. West Texas Intermediate (WTI) crude futures CLc1 climbed $1.70 to $59.53 by 1407 GMT, after hitting a sessionhigh of $59.63. In case of a trade deal, economies and market sentiment could rebound and support oil prices with brighter outlooks on global oil demand growth.

While demand concerns have weighed on the market, Brent has still risen nearly 20 percent in 2019 supported by a supply-cut pact led by the Organization of the Petroleum Exporting Countries, and Middle East tensions.

Brent crude futures LCOc1 settled at $67.01 a barrel, up $2.85, or 4.44 percent.

Lingering concerns due to the U.S.

"I think one of the reasons for sanctions against Iran and Venezuela is opening up the market for American oil sales", Oil Minister Bijan Namdar Zanganeh said in an interview with state TV late Sunday, a transcript of which was provided by his ministry's SHANA news agency.

"Iranian military talking about payback for the Gibraltar situation has put a little bid in the market here", said Robert Yawger, director of energy futures at Mizuho in NY.

Rising tensions between Iran and the United States have brought the two countries close to conflict. The European Union on Tuesday urged Iran to reverse its scaled up uranium enrichment that breaches a nuclear deal it agreed in 2015 with world powers.

"The inventory draw was much stronger than expected", which helped to push oil prices higher, said Carsten Fritsch, oil analyst at Commerzbank.

Price gains were capped by the U.S.

In the unfavourable scenario that the world's two largest economies do not reach a trade deal in the third quarter and aggregate demand for oil continues falling as it tracks economic weaknesses in China and the US.

In its monthly forecast on Tuesday, the U.S. Energy Information Administration (EIA) cut its 2019 world oil demand growth forecast by 150,000 barrels per day to 1.07 million bpd.

Battling what he called "the most severe organized sanctions in history", Zanganeh last week vowed to keep selling oil via "unconventional means". 'President Trump wants to be re-elected and will therefore be prepared to sign a trade deal, probably in 4Q, that doesn't necessarily meet all of his initial demands, ' says Mark Cliffe, Chief Economist and Head of Global Research of the ING Group.

The U.S.is also boosting its standing in the petroleum market, becoming a net exporter of petroleum-based products rather than an importer, based on the EIA report.

Texas and the Federal Offshore Gulf of Mexico (GoM), the two largest crude oil production areas in the US, both reached record levels of production in April, at 4.97 Mmbpd and 1.98 Mmbpd, respectively, the Energy Information Administration reported, Kallanish Energy learns.

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