Crude erased losses as escalating conflict in the Mideast region that’s home to almost half the world’s oil canceled out an earlier rout in commodity markets.
Futures popped above US$68 a barrel in New York on Monday after sliding as much as 1.8 per cent. Iranian-backed Houthis in Yemen launched unsuccessful missile attacks against Saudi Arabia while kingdom-led forces killed a senior leader of the rebel group. The flare-up countered a slump in everything from energy to metals after the U.S. softened its position on sanctions against Russian aluminum giant United Co. Rusal.
“It seems to be an escalation but Saudi Arabia has been very good at shooting these missiles down,”’said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. “The concern for oil really comes at what happens if it hits?”
Oil has risen more than 5 per cent this month amid geopolitical tensions in the Middle East. At the same time, OPEC’s cuts have continued to erode a worldwide excess. It won’t be necessary to extend historic supply limits if oil prices keep rising, Iranian Oil Minister Bijan Namdar Zanganeh said, according to the ministry’s Shana news service.
West Texas Intermediate crude for June delivery was down 8 cents to US$68.30 a barrel at 12:30 p.m. ET on the New York Mercantile Exchange. Total volume traded was about 23 per cent above the 100-day average.
Brent crude for June delivery added 8 cents to US$74.14 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a US$6.03 premium to June WTI.
The Bloomberg Dollar Index rose as much as 0.8 per cent for a fifth session of gains, keeping a lid on crude prices.
“Aluminum led the complex down. That seemed to take crude oil and other commodities down with it,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. “You’ve got a really strong dollar as well today.”