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Futures Movers: U.S. crude oil climbs up from one-month low as Iran, trade-deal tensions tug at market

U.S. crude-oil prices pushed into positive territory early Wednesday, recovering from their lowest close in over a month a day earlier, as increasing tensions between the U.S. and Iran and the threat of disruptions to supplies in the Middle East are weighed against worries that a protracted trade conflict between the U.S. and China could hurt energy demand. Read More...

U.S. crude-oil prices pushed into positive territory early Wednesday, recovering from their lowest close in over a month a day earlier, as increasing tensions between the U.S. and Iran and the threat of disruptions to supplies in the Middle East are weighed against worries that a protracted trade conflict between the U.S. and China could hurt energy demand.

“Oil prices are not having much fun in the current risk environment… which shouldn’t come as much of a surprise considering global growth fears and their impact on risk are intrinsically linked to future oil demand,” said Craig Erlam, senior market analyst with Oanda.

“It’s one of the often more overlooked drivers of oil prices but the correlation is clear. Oil has been on a slide since Trump claimed to have called OPEC regarding oil prices, which came at a time when the market was already looking rather stretched to the upside,” he added.

West Texas Intermediate crude for June delivery CLM9, +0.28% was up slightly at $61.41 a barrel. The contract finished Tuesday at $61.40 a barrel on the New York Mercantile Exchange, after touching an earlier low of $60.66. Prices posted the lowest front-month contract finish since March 29, according to Dow Jones Market Data.

Global benchmark July Brent crude LCON9, -0.27% fell 12 cents, or 0.2% to $69.76 a barrel. The settlement Tuesday at $69.88 marked the lowest front-month contract settlement since April 4. It settled Monday up 0.6% as back-and-forth trading persists.

“We’ve seen a bit of a corrective move since [Trump’s comments on OPEC] — just shy of 10% — but that may increase. We’re currently trading at a very interesting level, around $69-70 in Brent and $60-61 in WTI, a break of which could signal more pain to come. Given the recent shift in risk appetite, this is perfectly feasible,” said Erlam.

As for the news, the U.S. will deploy four B-52 bombers to the Middle East, in response to what the Trump administration said are threats of a possible attack by Iran on American troops in the region, according to a report Tuesday from CBS News.

Iran said Wednesday it would stop complying with some of its commitments under the 2015 nuclear deal, escalating tensions with the U.S. and moving closer to a breakdown of the landmark accord.

Meanwhile, U.S. Trade Representative Robert Lighthizer said earlier this week that the Trump administration will increase tariffs on $200 billion in Chinese goods early Friday. The prospect of higher tariffs had been first raised on Sunday by President Donald Trump, rattling investors who had anticipated that better progress toward a near-term resolution between the two superpowers. The uncertainty around those ongoing talks continues to push risk markets, including stocks and commodities, mostly lower.

The Energy Information Administration will release its weekly report on U.S. petroleum supplies on Wednesday. Analysts polled by S&P Global Platts expect to see a fall of 2.2 million barrels in crude stockpiles for the week ended May 3. They also forecast supply declines of 980,000 barrels for gasoline and 1.05 million barrels for distillates, which include heating oil.

In its monthly Short-term Energy Outlook report released Tuesday, the EIA raised its forecasts for oil prices and U.S. crude production for this year and next. For 2020, it forecast domestic crude output of 13.38 million barrels a day. That’s up 2.2% from the forecast released in April.

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