Oil Futures End Mostly Higher Tuesday

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled mostly higher on anticipated tightness in global oil supplies given the possibility of enhanced sanctions on Iran and Venezuela.

Supply tightness is exacerbated, traders say, by expected increases in global oil demand as this week's delay of a threatened U.S.-China trade war.

Recent high-level talks in Washington between the Trump administration and Beijing could spur the purchase of an additional $200 billion in American goods and services from China, though Beijing remains unwilling to put an exact dollar amount on expanded trade levels.

"We're seeing good follow-through momentum on concerns that the Trump administration could put additional sanctions on Iran, plus the Chinese trade war seems to have been put on hold which could boost economic activity," Phil Flynn, senior market analyst at Chicago-based Price Futures Group said at a midday interview. "We're also expecting to see another pretty good drawdown in inventories from this afternoon's release from the (American Petroleum Institute) for Oklahoma and the Gulf Coast, so supplies are tightening up."

Flynn anticipated active trading during the last 30 minutes of trade, the so-called market-on-close session, saying there was "a little bit of a squeeze play going on."

At the 2:30 p.m. EDT settlement, NYMEX June West Texas Intermediate futures expired at $72.13 a barrel (bbl), off 11 cents on the day on strong market on close selling pressure. The July WTI contract fell 15cts to $72.20 bbl settlement.

ICE July Brent was up 35 cents to a $79.57 bbl settle, its highest price in more than 3 years.

NYMEX June RBOB futures settled up 1.37 cents to $2.2702 gallon, off an earlier high of $2.2855 gallon. The June ULSD contract settled 0.62 cent higher at $2.28 gallon, off an earlier high at $2.2984 gallon.

Analysts said sanctions could be imposed on Venezuela following Sunday's elections. Reports circulate that Washington could restrict insurance on Venezuelan oil shipments or ban American sales of light oil used to blend with Venezuela's heavy oil to prepare it for export. A ban on imports of Venezuelan oil altogether is less likely, although possible, reports said.

Production in Venezuela, which derives 95% of its foreign currency earnings from oil sales, has plummeted to 1.41 million barrels per day (bpd), less than half the average 2013 output of 3.02 million bpd. The historic collapse reflects a variety of factors, including the 2014 oil price crash, stunted investment, the loss of public managerial expertise and the government's long-standing practice of redirecting oil revenue toward social spending.

Brian Whary can be reached at brian.whary@dtn.com