Oil little changed as U.S.-Iran dispute supports, trade war weighs

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NEW YORK (Reuters) – Oil futures were steady on Tuesday as the prospect of mounting U.S.-Iran tensions disrupting supply was offset by concerns that a lengthy trade war between Washington and Beijing would limit crude demand.

Oil little changed as U.S.-Iran dispute supports, trade war weighs

FILE PHOTO: An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015. REUTERS/Rick Wilking/File Photo

Brent crude futures settled at $72.18 a barrel, gaining 21 cents. U.S. West Texas Intermediate (WTI) crude futures settled at $62.99 a barrel, down 11 cents ahead of the front month contract for June delivery expiring on Tuesday. The July contract settled at $63.13 a barrel.

“The situation with China is as bearish as the Iran situation is bullish. That’s why I think we continue to be here in a stalemate,” said John Kilduff, a partner at Again Capital LLC in New York.

U.S. President Donald Trump on Monday threatened Iran with “great force” if it attacked U.S. interests in the Middle East.

On Tuesday, acting U.S. Defense Secretary Patrick Shanahan said that while threats from Iran remained high, deterrence measures taken by the Pentagon had “put on hold” the potential for attacks on Americans. He did not provide details.

Washington suspects that militia with ties to Iran organized a rocket attack in Iraq’s capital Baghdad.

Iran said it would resist U.S. pressure, declining further talks under current circumstances.

Tensions have mounted in an already tight market as the Organization of the Petroleum Exporting Countries, Russia and other producers have withheld supply to support prices since the start of the year in a six-month agreement.

Saudi Arabia on Sunday indicated there was consensus among OPEC and allied oil producers to continue limiting supplies.

Also adding to market tightness was the closure of a major pipeline in Nigeria and Russia supply disruptions.

The prolonged tariff fight between the United States and China raised concerns about a global economic slowdown, however.

Signs that Asian economies were already being hit by the trade conflict helped to boost the U.S. dollar to a four-week high, making crude more expensive for much of the world.

Disappointing U.S. economic data that showed existing home sales fell for a second straight month also hampered crude demand sentiment.

The market will also watch U.S. oil stockpiles reports on Tuesday afternoon from the American Petroleum Institute (API) and on Wednesday morning from the U.S Energy Information Administration (EIA).

“I think the market is taking a breath, waiting to see how inventories respond to refiners in the U.S. returning back from maintenance,” said Andy Lipow, president of Lipow Oil Associates in Houston.

Analysts in a Reuters poll forecast crude inventories fell 600,000 barrels last week. [EIA/S]

Additional reporting by Henning Gloystein in Singapore; Editing by Marguerita Choy, David Gregorio and Sonya Hepinstall