Oil trades higher on supply worries

Oil futures traded higher on Monday, extending the recent uptrend for the U.S. and international contracts as the threat of disruptions to supply gave crude values a lift.

Investors also await guidance from a Joint Technical Committee meeting on Monday, which could yield more details about output among major producers from the Organization of the Petroleum Exporting Countries and non-OPEC members, including Russia. A Reuters report said that one big theme of the meeting is managing expected production increases after earlier agreeing to ease some curbs to output.

October futures on West Texas Intermediate crude

CLV8, +0.72%

the U.S. benchmark, rose by 56 cents, or 0.8%, to $69.54 a barrel on the New York Mercantile Exchange, after finishing last week with a gain of 1.8% for the most-active contract.

November Brent

LCOX8, +0.63%

added 63 cents, or 0.8%, to trade at $78.72 a barrel on ICE Futures Europe, following a weekly advance of 1.6% for the global benchmark.

At the end of August, the Joint Ministerial Monitoring Committee said countries participating in an oil production-cut pact that was implemented at the start of 2017 fell to 109% in July, down from the committee’s reported compliance of 121% in June and 147% in May.

Monday’s meeting was intended to discuss better coordinating a 1-million-barrel-a-day increase, agreed upon in late June, which effectively boosted production back to the level pledged to in a January 2017 pact on output curbs.

Meanwhile, market participants have been anticipating U.S. sanctions on Iran specifically targeting oil, which are due to come into force in early November after President Trump’s decision in May to pull out of the nuclear agreement with Tehran. Sanctions against Iran, the third largest OPEC producer of oil, are expected to directly hurt its global crude exports.

Read: 3 ways Iran might respond to sanctions and what it means for oil prices

Traders also continued to watch for any impact on the energy market in the aftermath of Hurricane Florence, which continues to douse the Carolinas with rain and has resulted in dangerous flooding, even as the storm has been downgraded to a tropical depression.

The threat of new U.S. tariffs on Chinese goods, which could hurt demand for oil, also was being followed by crude-oil investors.

Trump is expected to impose $200 billion in tariffs on Chinese goods, which risks upending hope that the world’s largest economies could settle a tit-for-tat trade dispute amicably and assuage market fears that trade clashes could escalate into animosities intense enough to disrupt global economic health.

Peter Cardillo, chief market economist at Spartan Capital Securities, said crude was gaining on a number of factors including technical factors. He said “strengthening technical factors as the Brent [and the] WTI price spread widen, reaching levels that suggest a stronger rally ahead,” he wrote in a Monday research note, referring to the price differential between U.S. oil and the international Brent contract, which stands at above $9. “We continue to see WTI advancing towards the $75- $80 range,” Cardillo wrote.

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