Oil futures edged higher Tuesday, with the global benchmark tapping highs near the $80-a-barrel threshold, as strikes by workers in Norway and Gabon added to global production outages.
August West Texas Intermediate crude CLQ8, +0.32% tacked on 15 cents, or 0.2%, to $74 a barrel on the New York Mercantile Exchange. September Brent crude LCOU8, +0.96% the global benchmark, climbed by 57 cents, or 0.7%, to $78.64 a barrel on the ICE Futures Europe exchange, after climbing to as high as $79.51.
“Supply risk continues to be a major driver of both short and long-term price movements as the market assesses the degree to which renewed U.S. sanctions against Iran will halt Iranian oil exports,” said Robbie Fraser, commodity analyst at Schneider Electric. “While countries have technically been given a November 4th deadline by the U.S. to halt Iranian imports, present issues surrounding cargo insurance and long-term contract terms are already impacting flows.”
During a meeting last month, Organization of the Petroleum Exporting Countries agreed to lift output globally by 1 million barrels a day to help counteract lost barrels from Venezuela and Iran, where the U.S. has pulled out of a nuclear agreement and threatened to reimpose sanctions targeting Tehran’s oil exports.
Contributing to supply concerns, a strike by oil workers in Norway forced the shut in of 23,000 barrels a day of crude and 3,500 barrels a day of natural-gas liquids, said Robert Yawger, director for energy at Mizuho Securities U.S.A., in a note. A strike in Gabon was expected to take 54,000 barrels a day of production offline, according to JBC Energy. That adds to continued outages in Libya and Canada.
Output in Libya amounts to 527,000 a barrel, said analysts at Commerzbank, citing the director of the state oil company, which is less than half its February level. And output is set to decline further due to the closure of key oil terminals, they said, in a note. An outage at a production facility in Canada that isn’t expected to return to full utilization until midmonth has taken another 360,000 barrels a day offline.
Given the disruption to Libyan output in the first half of 2018, as well as the Canadian Syncrude outage and “perceived severity of U.S. policy toward Iran,” analysts at Barclays raised their expectations for Brent crude in the second half of the year to $73 a barrel, from $70 a barrel. They also lifted the outlook for 2019 Brent prices to $71 from $65.
In other energy trade, August gasoline RBQ8, +0.41% rose 0.2% to $2.153 a gallon, while August heating oil HOQ8, +1.18% was up 1% at 2.216 a gallon. August natural gas NGQ18, -1.52% fell 1% to $2.801 per million British thermal units.
For oil, “while the supply risk skews considerably bullish, demand still offers some potential downside risk in the face of rising consumer prices and potential escalations to trade barriers between the U.S. and China among others,” said Fraser. “For now though, the risk to oil prices from trade policy appears to be largely in step with the economy at large.”
The EIA will release its monthly Short-term Energy Outlook report later Tuesday. Monthly oil reports are due from OPEC on Wednesday and from the International Energy Agency Thursday.
Separately, the EIA Wednesday will issue weekly data on U.S. petroleum supplies, with analysts polled by S&P Global Platts forecasting a drop of 4.8 million barrels in last week’s crude stockpiles.
