Futures Movers: Oil prices bounce around as traders weigh geopolitical tensions, fundamentals

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Markets/commodities reporter

Crude-oil futures saw muted action in Tuesday, as political jitters centered on military conflicts in the Middle East, which helped to bolster prices last week, receded somewhat.

May West Texas Intermediate crude CLK8, -0.24% edged down by 5 cents, or less than 0.1%, to $66.17 a barrel on the New York Mercantile Exchange. June Brent LCOM8, -0.28% the global crude benchmark, ticked up by 15 cents, or 0.2%, to $71.57 a barrel on ICE Futures Europe.

Tuesday’s trade comes after the contracts climbed last week on the back of concerns of potential supply-disruptive military action in Syria and retaliation from Russia and Iran, allies to the country. However, so far, such a response hasn’t materialized despite U.S.-led airstrikes in Syria over the weekend.

“The not-as-bad-as-feared missile strike by the U.S. against Syria saw some of the geopolitical fear bids that pushed futures to multiyear highs last week come unwound,” sending WTI prices down by 1.7% Monday, said analysts for the Sevens Report.

More broadly, sanctions against Russia, imposed by the U.S., over a week ago, along with the Syrian conflict, have been delivering a jolt to prices of energy and metals futures because Moscow is a large producer of crude and commodities including palladium, aluminum and nickel.

“Strip away geopolitical risk that seems to have evaporated, to a certain degree, in the aftermath of the Syrian strikes, and you still have a crude oil market that is supported by strong demand for product and supported by OPEC production cuts,” said Robert Yawger, director of energy at Mizuho in a Tuesday research note.

In a monthly report issued last week, the International Energy Agency indicated that global oil stockpiles are dwindling and approaching the five-year average that the Organization of the Petroleum Exporting Countries is targeting.

OPEC, as well as some producers outside the energy cartel, including Russia, have been restraining crude output by 1.8 million barrels a day since the start of last year. The agreement, meant to rein in a global supply glut that has weighed on prices for over three years, is set to expire at the end of 2018.

Market participants also were awaiting the possible reimposition of sanctions against Iran, which could spark a rise in prices because the country is a significant producer of oil and an OPEC member.

Analysts at the Sevens Report, meanwhile, pointed out that the IEA also “warned that oil demand would likely fall with economic growth expectations if trade tensions between the U.S. and China worsened.”

“While the headline got attention, trade concerns remain on the back burner as the market largely expects a negotiated outcome, not an all-out trade war,” they said.

Growing U.S. crude production remained a concern, with a monthly report from the Energy Information Administration released Monday showing expectations for a climb in crude output from key U.S. shale plays of 125,000 barrels a day in May.

Separately, the EIA will release weekly petroleum supply data Wednesday, with the American Petroleum Institute issuing its own data late Tuesday.

Analysts polled by S&P Global Platts expect the EIA to report a rise of 625,000 barrels for crude stockpiles, along with supply declines of 1.9 million barrels for gasoline and 1.6 million for distillates.

May gasoline RBK8, -0.31%  fell 0.1% to $2.038 a gallon, while May heating oil HOK8, -0.91% shed 0.7% to $2.056 a gallon. May natural gas NGK18, -0.22% slipped 0.2% to $2.746 per million British thermal units.

—Christopher Alessi contributed to this article

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