Oil climbed to a three-year high near $79 a barrel in London on heightened political risks in the Middle East following unrest in Gaza and the return of sanctions against Iran.
Brent futures advanced as much as 1.6 percent. Dozens of Palestinians were killed in clashes with Israeli troops in Gaza after the U.S. opened an embassy in Jerusalem. Foreign ministers from the U.K., France and Germany will meet with their Iranian counterpart, Javad Zarif, to discuss salvaging an accord that allows Iranian oil exports, after the U.S. withdrew last week.
U.S. President Donald Trump’s withdrawal from a 2015 nuclear accord with Iran has driven oil to the highest since November 2014. American measures could cut the Persian Gulf nation’s crude exports, and traders are watching whether OPEC and its allies will end their agreement to curb supply and instead increase production to fill in the gap.
“U.S. sanctions on Iran take center stage in the oil market,” said Norbert Ruecker, head of macro and commodity at Julius Baer Group Ltd. in Zurich.
Brent for July settlement rose as much as $1.24 to $79.47 a barrel on the London-based ICE Futures Europe exchange, after increasing $1.11 on Monday. The global benchmark crude traded at a $7.20 premium to West Texas Intermediate for delivery in the same month.
WTI’s June contract was 67 cents higher at $71.63 a barrel on the New York Mercantile Exchange as of 8:57 a.m. local time, after rising 26 cents on Monday. Total volume traded Tuesday was about 45 percent above the 100-day average.
Oil for September delivery rose 1.6 percent to 472.8 yuan a barrel on the Shanghai International Energy Exchange. The contract fell 1.2 percent on Monday.
Saudi Arabia, OPEC’s de-facto leader, last month pumped the least crude since the output-cut deal began in early 2017. The numbers provided by the kingdom indicate that it could increase production by about 190,000 barrels a day and still respect the limit agreed with fellow members if it decides to compensate for the loss of Iranian barrels.
Supply concerns are also increasing with continuing tensions in the Middle East region. Fifty-five Palestinians were killed in confrontations with Israeli troops on Monday after tens of thousands converged on the Gaza Strip border to protest the U.S. embassy in Jerusalem. With more than 1,200 people wounded by live fire, it was the deadliest day in Gaza since Hamas’s last war with Israel in 2014.
© 2018 Bloomberg L.P