(Bloomberg) -- Oil steadied after a two-day gain, with the outlook for China’s economy and geopolitical risk in the Middle East remaining in focus.
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Brent crude traded near $71 a barrel after rising by 1.7% over the past two sessions, with West Texas Intermediate above $67. There were optimistic signals in the world’s two biggest crude consumers, with Beijing planning further measures to boost consumption, while US retail sales came in stronger-than-expected — although they still showed a modest slowdown.
Geopolitical concerns also remained at the forefront after US President Donald Trump said he would view attacks by Yemen’s Houthis on shipping in the Red Sea as equivalent to direct affronts by Iran. Ahead of the latest spike in tensions, which have seen US forces targeting the rebels, his administration had already been tightening sanctions against Tehran’s energy industry.
Crude remains about $12 lower from a peak in January, on a confluence of bearish factors. An escalating global trade war threatens demand, while OPEC and its allies are set to raise production from April. That’s as the global market was already set for a glut, according to the International Energy Agency.
The potential hit to global crude supply as the US clamps down on Iran “could range in the order of 1 million barrels a day, offsetting gains from OPEC as it phases out voluntary production cuts,” ANZ Group Holdings Ltd. analysts Brian Martin and Daniel Hynes said in a note.
At present, underlying metrics show a slightly stronger physical conditions. Timespreads — the difference between contract months — have widened recently, with Brent’s three-month spread at $1.38 a barrel in backwardation compared with a low of $1.08 earlier this month.
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