Saudi Iran conflict leads to rising oil prices

Rising US oil output isn't just being refined at home either, as WTI's widening discount to Brent makes US crude exports attractive.

Oil prices rose by almost 1 percent on Tuesday, lifted by a weak dollar, tensions in the Middle East and concerns of a further fall in Venezuelan output.

U.S. West Texas Intermediate (WTI) crude futures were at USD 62.61 a barrel at 07:        44 GMT, up 55 cents, or 0.9 percent, from their previous close.

Brent crude futures were at USD 66.53 per barrel, up 48 cents, or 0.7 percent.

"Tensions between Saudi Arabia and Iran gave prices some support," said Sukrit Vijayakar, director of energy consultancy Trifecta in a note.

Futures traders also pointed to general dollar weakness as a supporter of crude.

A weaker greenback makes imports of dollar-denominated crude cheaper for countries using other currencies at home, potentially spurring demand.

Worries about Venezuela's tumbling crude production also supported oil markets.

The International Energy Agency said last week that Venezuela, where an economic crisis has cut oil production by almost half since early 2005 to well below 2 million barrels per day was "clearly vulnerable to an accelerated decline," and that such a disruption could tip global markets into deficit.

Still, surging US crude oil production which has risen by more than a fifth since mid-2016, to 10.38 million bpd, has been looming over oil markets.

US output is now higher than that of top exporter Saudi Arabia. Only Russia produces more, at around 11 million bpd, although US output is expected to overtake Russia's later this year as well.

Soaring US output, as well as rising output in Canada and Brazil, is undermining efforts by the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) to curb supplies and bolster prices.

Rising US oil output isn't just being refined at home either, as WTI's widening discount to Brent makes US crude exports attractive.

"Spot Brent crude oil prices averaged USD 3.36 per barrel more than WTI prices in 2017 compared with just USD 0.40 per barrel more in 2016, providing a price incentive to export US crude oil into the international market," said Matt Stanley, a fuel broker at Freight Investor Services International in a note.

Brent's current premium over WTI is almost USD 4 per barrel.

With US oil increasingly making its way into the world, many analysts expect global oil markets to flip from slight undersupply in 2017 and early this year into oversupply later in 2018.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)