Oil futures rose Tuesday after Iran seized a South Korean ship and the Organization of the Petroleum Exporting Countries and its allies extended talks over whether to further ease production cuts.
West Texas Intermediate crude for February delivery rose 79 cents, or 1.7%, to $48.41 a barrel on the New York Mercantile Exchange. March Brent crude, the global benchmark, gained 84 cents, or 1.6%, to $51.93 a barrel on ICE Futures Europe.
Iran on Monday started enriching uranium up to 20% at an underground facility and seized a South Korean-flagged oil tanker in the Strait of Hormuz.
“Iran’s decision to continue its uranium enrichment program is initially likely to rule out any possibility of U.S. sanctions being lifted in the near future by President-elect Biden, meaning that Iran will not return to the export market for now,” wrote analysts at Commerzbank, in a note.
Meanwhile, OPEC and its Russia-led allies, a group known as OPEC+, deadlocked Monday over whether to further relax output curbs in February.
Saudi Arabia and most of the broader alliance backed holding off on any output increases, citing uncertainty over the toll a renewed surge in COVID-19 cases and a more contagious variant of the disease could have on demand, while Moscow called for allowing output to rise by another 500,000 barrels a day in February, as agreed in a December meeting, The Wall Street Journal reported.
Russia has worried about losing market share. Talks were set to continue Tuesday. Russia and Saudi Arabia have clashed before over output policy, prompting a devastating price war last spring that flooded the world with crude just as the pandemic brought the global economy to a near halt.
“There had already been fears that the compromise reached by OPEC+ in December, which would see production adjusted gradually, would be of little good to anyone,” the Commerzbank analysts said. “However, it is still the case, as it was then, that no agreement would be the worst outcome of all. We therefore expect some kind of consensus to be reached today.”