LONDON: Oil prices reversed early declines on Tuesday, supported by fears of tighter Russian and Iranian supply in the face of escalating Western sanctions.
Brent crude futures advanced 60 cents, or 0.79 percent, to $76.90 a barrel by 5:22 p.m. Saudi time, while US West Texas Intermediate crude was up 50 cents, or 0.68 percent, at $74.06.
It seems market participants have started to price in some small supply disruption risks on Iranian crude exports to China, said UBS analyst Giovanni Staunovo.
Concern over sanctions tightening supply has translated into increased demand for Middle Eastern oil, reflected in a rise in Saudi Arabia’s February oil prices to Asia, the first such increase in three months.
In China, Shandong Port Group on Monday issued a notice banning US-sanctioned oil vessels from its network of ports, three traders said, potentially restricting blacklisted vessels from major energy terminals on China’s east coast.
Shandong Port Group oversees large ports on China’s east coast, including Qingdao, Rizhao and Yantai, which are major terminals for importing sanctioned oil.
Meanwhile, cold weather in the US and Europe has boosted heating oil demand, though oil price gains were capped by global economic data.
Euro zone inflation accelerated in December, an unwelcome but expected blip that is unlikely to derail further interest rate cuts from the European Central Bank.
“Higher inflation in Germany raised suggestions that the ECB may not be able to cut rates as fast as hoped across the eurozone,” said Panmure Liberum analyst Ashley Kelty.
Technical indicators for oil futures are now in overbought territory and sellers are keen to step in again to take advantage of the strength, tempering additional price advances, said Harry Tchilinguirian, head of research at Onyx Capital Group.
Market participants are awaiting more data this week, including the US December non-farm payrolls report on Friday, for clues on US interest rate policy and the oil demand outlook.