Crude Prices Higher as Saudi Prince Visits U.S.
March 20 2018 - 5:19PM
Dow Jones News
By Alison Sider and Christopher Alessi
Oil prices climbed more than 2% to three-week highs Tuesday as
Crown Prince Mohammed bin Salman's visit to Washington raised the
prospect of a more aggressive stance toward Iran.
U.S. crude futures rose $1.34, or 2.16%, to $63.40 a barrel on
the New York Mercantile Exchange. Brent, the global benchmark, rose
$1.37, or 2.07%, to $67.42 a barrel on ICE Futures Europe. Both
benchmarks settled at their highest level since Feb. 26.
A closely watched meeting between President Donald Trump and the
Saudi crown prince helped shift the oil market's focus to Middle
East tensions on Tuesday.
Prince Mohammed has taken a more confrontational approach with
Iran, and the Saudi foreign minister, Adel al-Jubeir, on Monday
called the multinational deal for Iran to freeze its nuclear
program in exchange for easing sanctions a "flawed agreement."
"This rally is greatly aided by comments from the Saudi foreign
minister, " said Tamas Varga, an analyst at brokerage PVM Oil
Associates Ltd.
Mr. Trump has threatened to scrap the Iran nuclear deal, and
there have been fresh signals that the administration could pull
out of the agreement and move to reimpose economic sanctions,
frustrating the Islamic Republic's oil output.
The replacement of Rex Tillerson with Central Intelligence
Agency Director Mike Pompeo as secretary of state is expected to
boost those in the administration looking to confront Iran more
forcefully.
GZC Investment Management said in a monthly letter to clients
that renewed sanctions against Iran would take some 600,000 barrels
of oil a day off the market.
"Recent developments in North Korea suggest that the U.S.
administration could feel empowered by news that Kim Jong Un might
seemingly be willing to come back to the negotiation table. So will
the U.S. president be tempted to follow suit with Iran and even
possibly Venezuela?"
Until there is more clarity on how global events will play out,
"it will not be attractive to retain short positions in the oil
market," the firm said.
But the crown prince's visit to the U.S. comes as Saudi Arabia
is scaling back its ambitions for a public offering for the
country's state-owned oil giant, known as Aramco, according to
government officials and others close to the process.
The listing, which had been expected to raise as much as $100
billion this year, has been shelved until 2019.
"Without the pressure of the IPO, Saudi Arabia may have less
incentive to continue restricting its oil output by more than the
required amount, as it has been doing so far," analysts at
Commerzbank wrote in a note Tuesday.
OPEC -- of which Saudi Arabia is the de facto head -- and 10
producers outside the oil cartel, including Russia, have been
holding back output by 1.8 million barrels a day since the start of
2017, part of an effort to rein in a global supply glut and boost
oil prices.
The American Petroleum Institute, an industry group, said late
Tuesday that its own data for the week showed a 2.7 million-barrel
decrease in crude supplies, a 1.1 million-barrel fall in gasoline
stocks and a 1.9 million-barrel decrease in distillate inventories,
according to a market participant.
Gasoline futures rose 4.1 cents, or 2.13%, to $1.9659 a gallon.
Diesel futures rose 4.25 cents, or 2.23%, to $1.9495 a gallon.
Write to Alison Sider at alison.sider@wsj.com and Christopher
Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
March 20, 2018 17:04 ET (21:04 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.