Mexico state oil firm Pemex’s Salamanca refinery in Salamanca. Crude has gained support from supply cuts by Opec+. Image Credit: Reuters

LONDON: Oil prices rose on Tuesday, supported by tighter global supplies that have helped to offset persistent worries that demand will be hurt by the continuing US-Chinese trade conflict.

Brent crude rose by 23 cents, or 0.3 per cent, to $70.34 (Dh258) a barrel by 1055 GMT. US West Texas Intermediate (WTI) was up 52 cents, or 0.9 per cent, at $59.15.

US crude futures were trading for the first time since Friday after a long holiday weekend.

Investors, however, remain concerned that the trade war between the United States and China could hit the global economy and dent fuel consumption.

Brent futures last week registered a decline of 4.5 per cent and WTI was slid by 6.4 per cent for its biggest weekly loss since December.

“Oil prices lack direction because the oil market currently finds itself caught between supply risks and concerns about demand,” Commerzbank said in a note.

“A whole host of poor economic data from the major economic areas of the US, China and Europe, plus the entrenched situation in the trade talks, are not good news for the demand outlook.”

On the flip-side, crude has gained support from supply cuts by the Organization of the Petroleum Exporting Countries (Opec) and its allies since the start of the year, with political tensions in the Middle East another bullish influence.

No political solution appears forthcoming to end US sanctions that have largely taken Iranian and Venezuelan crude out of global markets.

“Brent is likely to resume its upward trend in line with its fundamentals, which are tight,” said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.

“This tightness is reflected in the generic front-month Brent futures time-spread. Backwardation is very steep at $1.33 a barrel the last time we sustained such deep backwardation was in 2013, when spot Brent was trading above $100 a barrel.” Backwardation, a market structure where the spot price is higher than the price of crude in later months, tends to indicate tight supplies and a drawdown in inventories.

Opec and allies including Russia are due to meet over June 25-26 to discuss output policy.

Khaled al-Fadhel, oil minister of Opec member Kuwait, said he expects the market to approach balance in 2019 as global inventories fall and demand remains strong.

“I believe the market is expected to be balanced during the second half of 2019, more towards the end of the year,” he told Reuters, adding that the impact of US sanctions on Iran “has yet to be felt”.

— Reuters