Oil futures edged higher Tuesday, attempting to bounce after worries about China’s economy and other concerns sent crude prices falling despite a significant escalation of Middle East tensions following a weekend drone attack that killed three U.S. troops in Jordan.
Price moves
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West Texas Intermediate crude for March delivery
CL00,
+0.76% CLH24,
+0.76%
rose 34 cents, or 0.4%, to $77.12 a barrel on the New York Mercantile Exchange. -
March Brent crude
BRNH24,
+0.29% ,
the global benchmark, was up 23 cents, or 0.3%, at $82.63 a barrel on ICE Futures Europe. April Brent
BRN00,
+0.37% BRNJ24,
+0.37% ,
the more actively traded contract, was up 25 cents, or 0.3%, at $82.08 a barrel. -
February gasoline
RBG24,
-0.08%
shed 0.6% to $2.2158 a gallon, while February heating oil
HOG24,
-0.81%
lost 1.3% to $2.797 a gallon. -
Natural gas for March delivery
NGH24,
+0.97%
traded at $2.08 per million British thermal units, up 1.2%.
Market drivers
“The spreading conflict in the Middle East remains the most visible and growing risk for energy markets,” analysts at J.P. Morgan wrote in note dated Tuesday.
“While escalation cannot be written off, it remains unlikely in our view, as main parties in the conflict have strong incentives to avoid direct confrontation, and so far they have acted accordingly,” they said.
Oil futures had fallen by more than 1% Monday, pulling back from their highest levels since November, as worries over China’s economy and other concerns around the demand outlook sparked pressure.
The downside for oil, however, remains limited though due to concerns around a potential intensification of fighting in the Middle East that could threaten crude flows.
“In energy, crude oil remains upbeat after last week’s positive price breakout above the $75 [a barrel] and the rising tensions in the Red Sea region as everyone is now expecting the U.S. response to the latest attacks,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a Tuesday note.
WTI saw resistance near the $80 a barrel level on Monday and could see consolidation between $78 and $80 a barrel before a potential breakout back above $80, she said.
“‘Drone attacks on refiners in Russia pose a new, less appreciated, but potentially more damaging threat to global oil product balances.’”
Meanwhile, “drone attacks on refiners in Russia pose a new, less appreciated, but potentially more damaging threat to global oil product balances,” said analysts at J.P. Morgan. “Since the start of the year, there have been five recorded Ukraine-linked drone attacks on Russian energy infrastructure.”
Stephen Innes, managing partner at SPI Asset Management, also said he believes the direct attack on a Russian oil tanker in the Gulf of Aden carries more significance for oil markets, so far, than a terrorist attack on a U.S. military outpost.
Particularly concerning is the “safe passage of approximately 1.7 million barrels of Russian crude oil traversing the Red Sea daily,” he told MarketWatch.
For now, many “scary things are happening in the Middle East,” but oil production “impairment or major supply disruptions isn’t one of them,” said Innes.
Read: Oil prices fall despite ‘grave escalation’ of Middle East crisis. Here’s why.
Over in Saudi Arabia, state producer Saudi Aramco on Tuesday said it won’t try to boost its maximum daily oil production to 13 million barrels a day after receiving an order from the country’s energy ministry. The company, formally known as the Saudi Arabian Oil Co.
2222,
said it would maintain maximum output at 12 million barrels a day.
This story originally appeared on Marketwatch
