Brent Surge Leads Oil Higher

XOMOn the back of a sharp increase in Brent futures, oil climbed higher on Tuesday. NYMEX-traded crude for August delivery added 15 cents to close at $79.36 per barrel. In London, Brent crude surged $2.01, or 2.2%, to settle at $93.02 per barrel. A weak dollar was also supportive of oil’s gains as the PowerShares DB US Dollar Index Bullish (NYSE: UUP) closed lower on thin turnover.

 

Brent crude, the global benchmark contract, got a lift from news of an oil workers strike in Norway. Ahead of Europe’s embargo on Iranian crude, which starts on July 1, the Norwegian strike serves as a potential to crimp supplies and possibly lift Brent futures in the near-term. South Korea also said it will ban imports of Iranian oil staring on July 1.

 

Norway is one of the largest non-OPEC producers in the world. The U.S.-listed shares of Statoil (NYSE: STO), Norway’s state-run oil firm, closed higher by one cent. The stock has lost more than 5% in the past week. Earlier this year, Statoil announced two new significant discoveries in the North Sea, an area that has declining oil output for the past several years.

 

Even with the possibility of a near-term supply issue, traders are likely acknowledging that demand in Europe and throughout the world remains weak and that Saudi Arabia, OPEC’s largest producer, is keeping plenty of supply on the market.

 

Another issue could keep a lid on oil prices. Tropical storm Debby has waned in intensity, allowing oil workers to return to various outposts in the Gulf of Mexico. Today, Ecuador, OPEC’s smallest producer, said it expects oil prices to hover around $80 per barrel over the next six months.

 

Weak economic data in the U.S. also suppressed oil’s gains today. In economic news, the Conference Board said U.S. consumer confidence fell 62 this month from a downwardly revised May reading of 64.4. Economists expected a June reading of 63.5. The May number was revised down from 64.9. June’s reading is the fourth straight month of declines.

 

The S&P/Case-Shiller index of home prices in 20 U.S. metro areas fell 1.9% in April, the slowest decline in more than two years. Economists expected a drop of 2.5% in April.

 

With stocks posting only a modest rebound following Monday’s big losses, Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX) each impressed. Both U.S. oil giants gained well over 1% on volume that was above average. After losing 9% on Monday, Petrobras (NYSE: PBR) added just a third of a percent today and at one point traded down to a new 52-week low.

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