Oil dips on profit taking but remains near two-year highs
SINGAPORE (Reuters) – Oil markets dipped on Wednesday as traders took profits after crude prices hit two-year highs, but markets remained well supported by expectations of strong Chinese demand and tightening supplies.
Traders said the market was eyeing growing tensions in the Middle East with concern, keeping a cautious tone on trade.
Brent futures, the international benchmark for oil prices, were at $63.61 per barrel at 0243 GMT, down 8 cents, or 0.1 percent, but still close to a near two-and-a-half year high of $64.65 (49.09 pounds) a barrel reached earlier this week.
US West Texas Intermediate (WTI) crude was at $57.06 per barrel, down 14 cents, or 0.2 percent, from their last settlement, but also still not far off the $57.69 a barrel reached earlier this week, the highest since July 2015.
Brent and WTI were “both drifting slightly lower as profit-taking set in amongst traders,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
Despite this, oil markets remain well supported, traders said.
China preliminary trade data on Wednesday is expected to show another strong run of crude imports which come just as its main oil suppliers, the Organization of the Petroleum Exporting Countries (OPEC) and Russia, are withholding supplies in order to prop up prices.
However, rising output in the United States is keeping markets from tightening further, with output up 13 percent since mid-2016 to 9.6 million barrels per day (bpd) C-OUT-T-EIA.
Beyond supply and demand fundamentals, traders were closely eyeing escalating tensions in the Middle East.
“Lebanese Prime Minister Saad Hariri’s resignation and a missile launch by pro-Iran Yemeni Houthis on Riyadh increase the risk of a regional conflict,” political risk consultancy Eurasia Group said.
The resignation on Saturday of the Saudi-allied Lebanese prime minister Saad al-Hariri, announced from Riyadh and blamed on Iran and Hezbollah, is seen by many as the first step in an unprecedented Saudi intervention in Lebanese politics.
Saudi air defence forces intercepted a ballistic missile fired towards Riyadh on Sunday. Saudi Arabia accuses arch-foe Iran of supplying missiles and other weapons to Houthi militia in Yemen. Iran denies the charges and blames the war in Yemen on Riyadh.
“Traders took a step back to evaluate the impact of the recent rise in geopolitical risks,” ANZ bank said.