Oil prices edge up, US plan to refill reserve offers support
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Oil prices edged up on Tuesday, after a sharp plunge in the previous session, as a U.S. plan to purchase oil for the Strategic Petroleum Reserve provided support while investors remained focused on developments in the Middle East.
Brent crude futures climbed 44 cents, or 0.6%, to $71.86 a barrel by 0025 GMT, while U.S. West Texas Intermediate crude was at $67.83 a barrel, up 45 cents, or 0.7%.
Both contracts tumbled 6% on Monday, hitting their lowest since Oct. 1, after Israel's retaliatory strike on Iran at the weekend bypassed Tehran's oil infrastructure.
The U.S. on Monday said it was seeking up to 3 million barrels of oil for the SPR for delivery through May next year, a purchase that would leave the government with little money to buy more until lawmakers approve more funds.
"While outlook for the Middle East situation remains alarming, the market is expecting a temporary lull in retaliatory strikes between Israel and Iran," said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
"The U.S. plan to refill the SPR provided some support to the market," he said, but predicted a downward trend ahead as peak winter kerosene demand season in the Northern Hemisphere was still some way off while demand in China remained sluggish.
On Saturday, scores of Israeli jets completed three waves of strikes against missile factories and other sites near Tehran and in western Iran, the latest exchange between the Middle Eastern rivals.
The attacks were more tailored toward military targets, easing fears that Israel might attack Iran's nuclear facilities or oil infrastructure.
Tensions remain high, however, as Iranian Foreign Ministry spokesperson Esmaeil Baghaei said on Monday that Iran will "use all available tools" to respond to Israel's weekend attack.
The U.S. warned Iran at the United Nations Security Council of "severe consequences" if it undertakes any further aggressive acts against Israel or U.S. personnel in the Middle East.
In the U.S., crude oil and gasoline stockpiles likely rose last week, while distillate inventories were seen down, a preliminary Reuters poll showed on Monday.
The American Petroleum Institute industry group is scheduled to release a weekly report on Tuesday and the Energy Information Administration, the statistical arm of the U.S. Department of Energy, will issue one on Wednesday. [EIA/S] [API/S]
