Oil rises as US and EU enter trade talks

New York — Oil prices rose for the third consecutive day on Thursday after Saudi Arabia suspended oil shipments through a strait in the Red Sea and as trade tensions between the US and the EU eased.

Brent futures rose 57c to $74.50 a barrel by3.42pm GMT. The contract earlier touched $74.83 a barrel, the highest since July 16. US West Texas Intermediate (WTI) crude futures were up 41c at $69.71.

After meeting European Commission president Jean-Claude Juncker at the White House on Wednesday, US President Donald Trump agreed to refrain from imposing car tariffs while the EU and the US start talks on cutting other trade barriers. “The market is very calm as it tries to assess the impact from the President Trump deal with the EU to hold off on tariffs,” said Phil Flynn, analyst at Price Futures Group in Chicago.

Brent rose in post-close trading on Wednesday after Saudi Arabia said it was “temporarily halting” oil shipments through the Red Sea shipping lane of Bab-el-Mandeb after an attack by Yemen’s Iran-aligned Houthi movement. The path through Bab-el-Mandeb links Saudi Arabia’s eastern trade partners and a refinery in Ras Tanura with the Red Sea port of Yanbu, the Suez Canal and the Sumed pipeline.

An estimated 4.8-million barrels per day (bpd) of crude oil and refined products flowed through the Bab-el-Mandeb strait in 2016 towards Europe, the US and Asia, according to the US Energy Information Administration (EIA). But Saudi Arabia also has the Petroline, also known as the East-West Pipeline, which mainly transports crude from fields clustered in the east to Yanbu for export. This could offset a bottleneck caused by Bab-el-Mandeb’s closure.

Olivier Jakob from PetroMatrix said in a note that it remains to be seen whether the Saudi move has an impact on shipping costs. “The passage is not as crucial as the Strait of Hormuz … but restricted flows through it would have an impact not just for crude but also for products due to the longer voyage time.”

Last week, US crude oil inventories tumbled more than expected to their lowest level since 2015, the EIA said on Wednesday, and traders said on Thursday that inventories at the US storage hub in Cushing, Oklahoma, have continued to fall.

They were forecast to drop by 1.1-million barrels until the end of Tuesday, traders said, citing energy information provider Genscape.

Reuters