LONDON—Oil prices edged down slightly Monday but largely sustained robust gains from last week that have been driven by a growing geopolitical risk premium.
May West Texas Intermediate crude CLK8, -0.14% slipped 13 cents, or 0.2%, at $65.75 a barrel. The contract settled at $65.88 a barrel on the New York Mercantile Exchange, which was the highest finish for a front-month contract since Jan. 26, according to FactSet data. It rose roughly 5.6% for last week.
May Brent crude LCOK8, +0.01% slipped less than a cent, or 0.1%, at $70.37 a barrel on ICE Futures Europe. Brent settled Friday above $70 a barrel for the first time since late January. The contract scored a weekly jump of 6.4%.
Weekly percentage gains for the U.S. and global benchmarks were at the highest since the week ended July 28.
“Geopolitics and growing concerns about the U.S. leaving the Iran deal lifted oil prices back towards $70 per barrel,” according to Norbert Ruecker, head of macro and commodity research at Julius Baer.
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The Trump administration last week reshuffled its national security team with more hawkish officials who have been opposed to a 2015 U.S.-led international agreement to curb Iran’s nuclear program. If the U.S. were to pull out of the deal, it would likely result in renewed economic sanctions on the Islamic Republic that could frustrate its oil exports and reduce the global supply.
“As things stand, it is a question of when, not if, the U.S. withdraws from the agreement and fires a fresh sanctions salvo towards the OPEC nation,” Stephen Brennock, an analyst at PVM Oil Associates Ltd., wrote about the Iran deal. “The specter of trade protectionism and the subsequent adverse impact on rising global oil demand was put on the back burner,” Brennock added in a note Monday.
At the same time, the “strength in oil has come on the back of strong supply and demand fundamentals as evidenced by recent U.S. data which shows total U.S. oil stocks more or less flat over the past four weeks,” according to analysis at consultancy JBC Energy.
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Speculative financial investors have also increased their net long positions in Brent crude to record levels, according to analysts at Commerzbank.
But Ruecker of Julius Baer cautioned that “profit taking risks still loom large, strong output growth challenges the market tightening narrative and the [OPEC] supply deal’s overdue transitioning remains blanketed in uncertainty.”
The Organization of the Petroleum Exporting Countries indicated late last week it would continue to coordinate on supply cuts into 2019. OPEC and 10 members outside the oil cartel, including Russia, have been holding back crude output by 1.8 million barrels a day since the start of last year. The participants agreed in November to abide by the deal through the end of 2018.
On Nymex, April gasoline RBJ8, -0.05% slipped 0.2% to $2.0291 a gallon, after ending about 4.5% higher on the week. April heating oil HOJ8, +0.31% added 0.1% to $2.0223 a gallon after a 5.6% weekly rise.
April natural gas NGJ18, -0.27% was little changed near $2.589 per million British thermal units, after logging a weekly loss of 3.6%.