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Oil prices rose on Monday adding to last week's gains, lifted by tensions between the United States and Iran, but concerns about the possibility of weakening demand kept a lid on gains .
Benchmark Brent crude was up 13 cents or 0.2 per cent at $65.33 a barrel by 1238 GMT, while US crude was up 51 cents, or 0.89 per cent, at $57.94.
Last week, Brent climbed 5 per cent and US crude surged 10 per cent after Iran shot down a US drone on Thursday in the Gulf, adding to tensions stoked by attacks on oil tankers in the area in May and June that Washington has blamed on Iran. Iran denies any role in the tanker attacks.
US President Donald Trump said he had called off a retaliatory attack on Iran at the last minute after the drone was downed, but Washington has said it would still step up its sanctions on Tehran.
“We have been surprised by the relative lack of crude price response to some of these events until just recently, which probably reflects the prevailing sentiment of a market in oversupply,” HSBC said in a note. “The tightening of supply/demand balances in the coming months is likely to only heighten the market focus on these geopolitical risks unless they abate.”
The International Energy Agency (IEA) said this month it had revised down its estimate for crude demand growth in 2019, citing the US-China trade row. However, supplies may remain relatively tight, as the Organisation of the Petroleum Exporting Countries and its allies including Russia, an alliance known as OPEC+, appear likely to extend a deal on curbing output when they meet on July 1-2 in Vienna, analysts said.
“An extension of OPEC+ production cuts through the end of the year seems highly likely given recent price action,” US investment bank Jefferies said in a note. Russian Energy Minister Alexander Novak said on Monday that international cooperation on crude production had helped stabilise oil markets and was more important than ever.
“There is a good example of successful cooperation in balancing the oil market between the OPEC countries and non-OPEC”, he said. But he also voiced concerns about demand, saying extending the deal on supply cuts would depend in part on “the consumption of oil in the third and fourth quarters, the pace of growth of the world economy”.
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