As signs that an extension of the OPEC+ production cuts may not be an accomplished deal and with investors weighing mixed signals from the White House on Iran, oil gained 8% after rallying for three days.
On Monday, after President Donald Trump imposed sanctions on Iran’s supreme leader, Ayatollah Ali Khamenei, futures in New York edged lower after closing up 0.8 percent.
Before the upcoming the G-20 summit in Japan, wherein Trump will meet with Chinese President Xi Jinping, Russia suggested it’s taking a wait-and-see approach on the OPEC+ output deal.
As the rising tension between the U.S. and Iran urged concern that there could be disruptions to global energy flows or even outright war, about 13% of oil ascended since mid-June.
A senior economist at Mizuho Research Institute Ltd. in Tokyo said, “Investors are taking a wait-and-see stance, as it’s not certain how things will go at the G-20 summit.”
In addition, he also said, “Concern over the economic slowdown means WTI oil prices aren’t likely to rise to $65, or even $60, unless there’s a rapid escalation of tensions in the Middle East or major progress in the trade talks.”
August delivery for West Texas Intermediate plunged 5 cents, or 0.1%, to $57.85 a barrel on the New York Mercantile Exchange. Over the previous three sessions, the contract has collected 7.7 percent.
On the flipside, August settlement for Brent grew 6 cents to $64.92 a barrel on London’s ICE Futures Europe Exchange. On Monday, it fell 34 cents at a premium while the benchmark crude contract traded of $7.07 to WTI.
Fears decline crude demands
The spare capacity of 12 million barrels per day was sufficient and it would meet its customers’ needs as stated by the chief executive of Saudi Aramco, state oil firm of OPEC’s de facto leader.
On Monday, the Federal Reserve Bank of Dallas had made worries about slipping demand for crude oil due to the trade conflict as a weak manufacturing data was released.
In a note, an analyst said, “The geopolitical risk premium (in the Middle East) is partly offset by another stand-off, namely between the U.S. and China.”
In addition, he also stated, “The general consensus is that no break-through will take place toward the end of the week when the two leaders resume their trade talks. The likely failure to reach a mutually acceptable trade agreement will raise demand concerns that will dishearten oil bulls.”
Meanwhile, a deal is set to be extended on curbing output when they meet on July 1-2 as the Organization of the Petroleum Exporting Countries and its allies including Russia appear to be expecting to talk about it.
Concerns about demand were voiced out by Russian Energy Minister Alexander Novak, it also stated international cooperation on crude production had helped stabilize oil markets and was more important than ever. The two OPEC members have cut oil exports from U.S. sanctions on Iran and Venezuela. But the production of US have been rising, letting some Russian officials to accuse Washington of carving out market share for its energy exports.