Why Oil Prices Just Rallied To $70

Why Oil Prices Just Rallied To $70

U.S. WTI crude futures were up 25 cents at $62.31 a barrel.

Crude oil prices enjoy their strongest two-day rally in almost a month, as optimism surges among investors that the trade dispute between the US and China may be resolved without greater damage to the global economy.

Brent crude futures were up 39 cents on the day at $67.50 a barrel by 0912 GMT.

Light, sweet crude for May delivery rose $1.29, or 2%, to $64.71 a barrel on the New York Mercantile Exchange, trading at a one-week high.

In physical oil markets, OPEC's number two producer Iraq said on Monday that it is keeping prices for its crude supplies in May steady.

But future US involvement in the Middle East could interrupt crude supply chains and make it hard for producers to ship overseas, sparking a bid for oil on Tuesday.

Concerns of a prolonged trade dispute between the world's two biggest economies and uncertainty over the supply and demand balance of global oil markets have made for volatile trading in the last few weeks.

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Oil prices have generally been supported by healthy demand as well as by supply restraint led by oil cartel Opec, which started in 2017 in order to rein in oversupply and prop up prices.

Beyond the trade dispute, oil markets are also concerned about the potential of renewed USA sanctions against some significant oil producers.

Investors looked forward to data on US crude inventories and Organisation of Petroleum Exporting Countries (OPEC) production levels.

Turning to data, unofficial figures from the American Petroleum Institute suggest that both crude and gasoline stocks were higher last week (the consensus expected stocks to keep falling). U.S. President Donald Trump promised a "major response" within 24 to 48 hours to an alleged chemical attack in Syria, which he said could be the work of the Syrian government, Iran, Russia or all three.

In a sign that oil supplies remain ample, China's Sinopec, Asia's largest refiner, plans to cut Saudi crude imports in May by 40 percent, instead buying from alternative sources, after Saudi Aramco set higher-than-expected official prices, a company official said on Monday.

Monthly oil reports are also due out from the Organization of the Petroleum Exporting Countries on Thursday and the International Energy Agency on Friday. Only Russia pumps more crude out of the ground, at nearly 11 million bpd. The US Energy Information Administrations still expects production to total 10.7 million barrels a day this year - a record.

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