© Reuters. FILE PHOTO: Pump cranes work at sunset in an oil field in Midland, Texas, U.S., August 22, 2018. REUTERS/Nick Oxford/File Photo
Author: Florence Tan
SINGAPORE (Reuters) – Oil prices rose in early Asian trade on Monday, supported by tensions in the Middle East following a drone attack in Iran and as Beijing pledged over the weekend to promote a recovery in consumption to support demand for the fuel.
Futures were up 54 cents, or 0.6%, at $87.20 a barrel by 01:15 GMT, while U.S. West Texas Intermediate crude was at $80.22 a barrel, up 54 cents. , or 0.7%.
Israel appears to be behind an overnight drone attack on a military factory in Iran, a US official said on Sunday.
“It’s still not entirely clear what’s going on in Iran, but any escalation there has the potential to disrupt the flow of crude oil,” said Stefano Grasso, senior portfolio manager at 8VantEdge in Singapore.
Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known collectively as OPEC+, are unlikely to change current oil production policies when they meet virtually on February 1.
However, indications of an increase in crude oil exports from Russian Baltic ports in early February caused Brent and WTI to post their first weekly loss in three weeks.
On Saturday, the Chinese government said it would promote a recovery in consumption as the main driver of the economy and boost imports, state broadcaster CCTV reported.
“We have Russia on the supply side and China on the demand side. Both can fluctuate by more than a million barrels a day above or below expectations,” said Grasso, a former oil trader with Italy’s Eni.
“China appears to have surprised the market in terms of the speed of its recovery from the COVID-19 situation, while Russia has surprised in terms of the resilience of export volumes despite sanctions.”
China resumes business this week after the Lunar New Year holiday. The number of passengers traveling before the holiday rose above the level of the past two years, but is still below 2019, Citi analysts said in a note, citing Transport Ministry data.
“The overall recovery in international traffic remains gradual, with high single digits to low single digits for 2019 levels, and we expect further recovery when outbound group travel resumes on February 6,” Citi said in a note.