ICE Brent rises above $75/b, set to climb higher
Crude oil futures were higher during Asia mid-morning trade Monday, with front month ICE Brent July futures hitting above $75, while the prompt month NYMEX crude oil June futures stood above $70/b, mainly on the back of the ongoing geopolitical tension between US and Iran coupled with trade war tensions between US and China being back on the table.
Investors had shrugged-off higher rig counts and the stronger US dollar, saying that prices were set to hit new highs amid an increase in demand for crude oil.
At 11:05 am Singapore time (0305GMT), July ICE Brent crude futures were up 46 cents/b (0.61%) from Friday's settle to $75.33/b, while the NYMEX June light sweet crude contract was up 53 cents/b (0.76%) at $70.25/b.
In light of the recent gains in crude oil prices, rig counts in the US rose by nine to 834 for the week ending May 4, marking the fifth consecutive weekly rise, Baker Hughes reported.
"The lack of any progress on the US-Iran nuclear waiver is precisely what is pushing oil prices higher as West Texas Intermediate crude oil traded above the $70 mark for the first time since November 2014 on Friday," OANDA's head of trading Stephen Innes said.
"We're in the thick of it now as the president has until May 12 to decide whether the US will stay in a deal with Iran or not," Innes added.
Meanwhile, industry sources expected a reversal in the recent crude builds in inventory as the impending driving season in US should bolster a healthy demand for gasoline, Mitsubishi Corp.'s senior advisor Tony Nunan said.
"On the JCPOA, all signals point to Trump wanting to pull out from the deal but it could be extended one more time. I feel that China and Russia will not re-impose the sanctions ," Nunan added.
On the short term pricing outlook, Nunan said "$75-$80/b" for Brent and "$70-$75/b for WTI seems possible, but it might be a stretch to hit higher than that."
Market participants also felt that trade war tensions were back on the table following the US-China trade talks.
"The frank discussions and exchange of opinions failed to yield the results market hoped," OCBC Bank's commodity economist Barnabas Gan said.
"The US is asking the impossible to force China to slash its trade surplus with the US by US$200 billion by end-2020. Given the consensus for 'immediate attention' to change the US-China trade and investment relationship has been formed within the Trump administration and the USTR decision on whether to impose additional tariffs on US$50 billion Chinese goods is within one month, we think the risk remains high," Gan added.
Market participants would most likely shift their focus on the inventory data by the American Petroleum Institute and Energy Information Administration set to be published later Tuesday and Wednesday, respectively.
Meanwhile, the most active September crude futures contract on the Shanghai International Energy Exchange(INE), the most was up $1.51/b (2.15%) from Friday's settle at Yuan 456.5/b ($71.89/b). Price quotes at the INE website are delayed by 30 minutes.
As of 0305 GMT, the US Dollar Index was 0.11% lower at 92.325.
