Oil prices gained Tuesday, with U.S.-priced crude trading at its best levels this month, as Middle East tensions were stoked anew when Yemen’s Iranian-allied Houthi rebels said they attacked a Saudi airport.
Traders again weighed signs that the Organization of the Petroleum Exporting Countries will decide to extend its production-cut agreement following a committee meeting over the weekend.
In reaction, West Texas Intermediate crude for June delivery CLM19, +0.49% climbed 33 cents, or 0.5%, at $63.43 a barrel on the New York Mercantile Exchange. It settled at $63.10 Monday, the highest finish for a front-month contract since May 1, according to Dow Jones Market Data. The June contract will expire at Tuesday’s settlement.
Global benchmark July Brent UK:LCON9 meanwhile, rose 30 cents, or 0.4%, to $72.27 a barrel on ICE Futures Europe.
Yemen’s Iranian-allied Houthi rebels said Tuesday they attacked a Saudi airport and military base with a bomb-laden drone, an assault acknowledged by the kingdom as Mideast tensions remain high between Tehran and the United States. There were no immediate reports of injuries or damage.
The attack on the Saudi city of Najran came after Iran announced it has quadrupled its uranium-enrichment production capacity, though still a level far lower than needed for atomic weapons, a year after the U.S. withdrew from its nuclear deal with world powers.
Underlining the tensions, Iranian President Hassan Rouhani is seeking expanded executive powers to better deal with “economic war” triggered by the Trump’s administration’s renewal and escalation of sanctions targeting the Islamic Republic, the state-run IRNA news agency reported Tuesday.
Market uncertainty has been rising since the White House ordered warships and bombers to the Persian Gulf two weeks ago. A top diplomat from Saudi Arabia said his country wasn’t looking for war either but would defend itself against Iran if needed, a week after two of the country’s oil tankers were attacked near the United Arab Emirates.
“Escalating tensions between the U.S. and Iran, in addition to signs that OPEC will continue its production cut drove oil higher,” said Jasper Lawler, analyst at London Capital Group.
“A threat that the U.S. would attack Iran with great force if it attacked U.S. interests in the Middle East has stoked tensions between the two nations further,” Lawler said. “The risk premium is being reflected in the price of oil; a market, which is already tight as OPEC producers continue with limits on production.”
Meanwhile, OPEC and non-OPEC members, such as Russia, met in Jeddah, Saudi Arabia, on Sunday to explore production options that will be decided at a June summit in Vienna. Last December, the group agreed to cut output by a collective 1.2 million barrels a day, a move that has driven gains for oil prices this year, though the agreement expires at the end of June.
Saudi energy minister Khalid al-Falih told reporters that there is support for rolling over those targets among ministers, according to The Wall Street Journal. Still, Russia’s support for extending cuts was unclear after energy minister Alexander Novak said oil producers were looking at “various options,” according to the WSJ.
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