Oil Rises Amid Middle East Tensions, Shrinking Crude Stockpiles

Oil rose for a third day amid flaring geopolitical tensions in the Middle East and expectations for a decline in U.S. crude stockpiles.

Futures in New York climbed as much as 1 percent, set for the highest close since late 2014. A measure of oil volatility rose the most in two weeks amid concern that President Donald Trump will reimpose sanctions on Iran, while friction between the Islamic Republic and fellow OPEC member Saudi Arabia increased with further violence in Yemen.

Oil has rallied this month as the Organization of Petroleum Exporting Countries and its allies conclude they have all but wiped out a global crude surplus, while Iran signaled the group can end output cuts if prices continue to rise. Still, with production in the U.S. at a record, investors are wary that expanding volumes from shale producers could thwart OPEC’s efforts to eliminate the glut.

“Oil bulls refuse to budge,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. Tuesday’s gain shows attention is “still firmly on geopolitics.”

West Texas Intermediate crude for June delivery rose as much as 69 cents to $69.33 a barrel on the New York Mercantile Exchange, and traded at $68.83 as of 10:18 a.m. London time. Total volume traded was about 12 percent above the 100-day average.

Brent crude for June delivery advanced 5 cents to $74.76 a barrel on the London-based ICE Futures Europe exchange after climbing 0.9 percent on Monday. The global benchmark crude traded at a $5.92 premium to June WTI after closing at $6.07 on Monday, the highest premium in more than three months.

Futures for September delivery on the Shanghai International Energy Exchange traded up 1.7 percent at 447.3 yuan a barrel. The contract closed up 0.7 percent at 439.7 yuan on Monday.

The Cboe/Nymex oil volatility index jumped 3.9 percent on Monday, posting its biggest gain since April 10. Saudi Arabia intercepted ballistic missiles fired by Iran-backed Houthis in Yemen, while a kingdom-led coalition killed a senior leader of the rebel group.

In the U.S., crude stockpiles probably fell for a second week last week, losing 2.25 million barrels, according to a Bloomberg analyst survey ahead of government data on Wednesday. Inventories in the nation’s oil-storage hub of Cushing, Oklahoma, may have dropped by 150,000 barrels in the period, a separate survey showed.

As well as Mideast tensions and U.S. stockpiles, America’s recent softening stance against China and Russia is also boosting sentiment among oil investors, Will Yun, a commodities analyst at Hyundai Futures Corp., said by phone. Treasury Secretary Steven Mnuchin is  considering lifting sanctions against Russian metal giant United Co. Rusal.

Other oil-market news:

The Bloomberg Dollar Spot Index was little changed after rising to the highest in more than three months on Monday. China’s crude imports from Russia increased 24 percent year-on-year in March, while purchases of Saudi Arabian crude rose 1.2 percent, according to data released by the nation’s General Administration of Customs on Tuesday. Saudi Aramco plans to trade as much as 6 million barrels a day, a jump in volume that would put it in the top tier of companies that buy and sell crude and refined products. Exxon Mobil Corp., a cornerstone of fund managers’ portfolios alongside the biggest names in corporate America, has fallen to ninth-largest company on the S&P 500 Index after leading the measure a decade ago.