Oil's 2% Rise Reflects Global Output Optimism: Analysts

Meanwhile, the U.S. and India work towards settling its trade dispute: File Image/Pixabay

Oil prices on Tuesday rose over 2 percent as traders expected an upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) would result in the cartel keeping voluntary cuts in place; they also reacted positively to Washington imposing sanctions against Iran's oil revenues.

Brent settled up 99 cents, or 1.4 percent, at $69.14 per barrel, while West Texas Intermediate settled up $1.58, or 2.4 percent, at $69.59.

The OPEC expectations stemmed not from any insider knowledge but purely analytical speculation, such as that provided by independent analyst Gaurav Sharma, who noted that given an anticipated supply surplus by the end of this year, the cartel might wait for more data following the U.S. summer driving season before it unwinds cuts.

The sanctions against Iran was widely viewed as U.S. president Donald Trump justifyably keeping pressure on the Islamic republic in the aftermath of stalled nuclear talks.

Optimistic news on Tuesday also came from India, whose trade minister Piyush Goyal told media that his country is in talks with Washington for a trade agreement after being hit with a 50 percent tariff for New Delhi continuing to buy oil from Russia. 

But as usual, pundits had widely conflicting opinions about the state of the oil market, with Bloomberg seemingly at odds with the pervading notion of a growing global surplus by writing that Tuesday's trading "supported a rally driven by signs of enduring physical market tightness."

The news agency went on to state that "The wealth of bullish near-term factors — from the war in Ukraine to the US deploying naval forces off the coast of Venezuela — contributed to timespreads widening in their backwardated structures toward the end of last week."

Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management, said, "Sentiment in the oil market is shifting from very negative to more neutral; the main support for oil prices is the geopolitical premium…no one believes anymore that a peace deal between Russia and Ukraine is imminent."