Oil prices edged higher on Tuesday amid lingering concerns about possible supply disruptions in the Middle East, but an overall weaker demand outlook kept a lid on gains, helped by a vow by the International Energy Agency (IEA) to take swift action to keep global oil markets adequately supplied.
West Texas Intermediate (WTI) crude futures were unchanged at $56.22 per barrel.
Brent crude futures rose 4 cents to $63.30 a barrel by 0335 GMT. The international benchmark rose more than 1% in the previous session, following Iran’s seizure of a British tanker last week that stoked fears of supply disruptions from the energy-rich Gulf.
“Downward revisions on global oil demand, along with rising challenges in the macroeconomic environment, have capped bullish gains for oil prices,” said Benjamin Lu Jiaxuan, commodities analyst at Singapore-based Phillip Futures.
Meanwhile, the IEA said it was closely monitoring developments in the Strait of Hormuz as relations between Iran and Britain remain tense.
“The IEA is ready to act quickly and decisively in the event of a disruption to ensure that global markets remain adequately supplied,” it said, adding that executive director Fatih Birol has been in talks with IEA members, associate governments and other nations.
“Consumers can be reassured that the oil market is currently well supplied, with oil production exceeding demand in the first half of 2019, pushing up global stocks by 900,000 barrels per day,” the IEA said in a statement.
The potential for disruption in the Middle East has come amid a more fundamental souring of market sentiment in recent days, with hedge funds, producers and traders all taking a more bearish tack in response to what they see as weakness in worldwide demand.
“Lower global demand estimates…have hit crude prices in the last couple of weeks,” said Alfonso Esparza, senior market analyst at OANDA.
“Weather and geopolitical disruptions have been temporary and only the OPEC+ deal has given traders clarity with the group’s commitment to reducing the oil glut at their expense.”
The ‘OPEC+’ deal refers to coordinated efforts by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers, including Russia, to withhold supplies since the start of the year to prop up prices.