Oil rose to trade near $58 a barrel in New York as investors awaited guidance from the Federal Reserve on interest rates and as tensions in the Persian Gulf maintained the risk of supply disruption.
West Texas Intermediate futures added 0.8%, recouping earlier losses. Fed Chairman Jerome Powell is scheduled to testify to Congress on Wednesday and Thursday, likely giving investors clues on the path for U.S. monetary policy.
Tensions in the Middle East remained high, as BP Plc kept a ship in the Persian Gulf for fear it might be seized by Iran in retaliation for British forces arresting a vessel carrying the Islamic Republic’s crude last week.
Crude has slipped this month even as military confrontation with Iran has heightened, and the Organization of Petroleum Exporting Countries and its allies decided to extend output curbs into early 2020. Although there has been some easing of trade tensions between the U.S. and China, worries persist that a slowing global economy is undermining demand for fuels.
“There is a strong case to paint a bullish as well as a bearish picture depending on one’s view on the general state of the world economy and politics,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.
WTI oil for August delivery rose 43 cents to $58.09 a barrel on the New York Mercantile Exchange at 8:57 a.m. local time. The contract dropped 4.8% last Tuesday but rallied 2.5% since then through Monday’s close.
Brent for September settlement rose 55 cents, or 0.9%, to $64.66 a barrel on the ICE Futures Europe Exchange, after closing 0.2% lower on Monday. The global benchmark crude traded at a $6.40 premium to WTI for the same month.
Powell’s testimony will be watched closely for an indication of whether the Fed is likely to cut U.S. interest rates at its next meeting on July 31. The dollar rose 0.7% last week and was 0.1% higher on Tuesday. A stronger greenback reduces the appeal of commodities priced in the currency.
“Negative risk sentiment in equity markets and a higher U.S. dollar are countering OPEC’s efforts to stabilize oil prices,” said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen. “In the bigger picture, oil prices are stuck between the positive impact of the trade war ceasefire and OPEC+ cuts, and the negative impact of a higher dollar and weak global macroeconomic data.”
British Heritage, the BP-run tanker, is now idling off Saudi Arabia’s coast after it made a U-turn before it was scheduled to pick up crude from Basrah in Iraq. Iran’s deputy foreign minister said on Sunday he considered the seizure by U.K. forces to be an act of piracy, while a former leader of Iran’s Revolutionary Guard said the Islamic Republic should take a British tanker in response.
© 2019 Bloomberg L.P.