Oil prices stabilized on Tuesday, pausing after strong gains last week, but losses were limited after a U.S.-Mexico trade agreement eased concerns about tensions between the two countries.
Brent crude futures rose 6 cents to $76.27 a barrel by 11:00 a.m. EDT. The global benchmark touched $76.97 earlier in the session, the highest since July 11.
U.S. West Texas Intermediate (WTI) crude futures fell 21 cents to $68.66 a barrel.
Last week Brent marked a 5.6 per cent gain, while WTI increased 4.3 per cent.
“We have put in a good rally the last couple of days and for lack of any headline developments, possibly people are starting to take profits against these levels,” said Bob Yawger, director of futures at Mizuho in New York.
Market participants awaited industry data on U.S. oil inventories, due at 4:30 p.m. EDT, that was expected to show a drop in crude stocks last week. Official data is due on Wednesday.
Industrial action on French oil major Total’s North Sea oil platforms on Sept. 3 will be suspended, the Unite trade union said.
Boosting market sentiment, however, was news that the United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (NAFTA).
“It paves the way for the energy industry in both countries to coexist rather freely, and that should be good for demand,” Yawger said.
Canada’s top trade negotiator joins her Mexican and U.S. counterparts in Washington on Tuesday in a bid to remain part of the trilateral North American trade pact.
Modest output increases from OPEC also supported prices. The monitoring committee of the Organization of the Petroleum Exporting Countries found that producers participating in a supply-reduction agreement, which includes non-OPEC member Russia, cut output in July by 9 per cent more than called for.
The findings of the OPEC monitoring committee for last month compare with a compliance level of 120 per cent for June and 147 per cent for May, meaning participants have been steadily increasing production, but at a more modest pace than some had expected.
Investors are now more confident that supply is likely to fall short of demand in the coming months, as reflected by a narrowing in the discount, or spread, between the October and November Brent futures contracts to around 26 cents a barrel, half of what it was a month ago.
“We were of the view earlier that we are expecting prices to edge a bit lower over the rest of this year, but I struggle to see that. I see the market remaining well supported, with potential shocks to the upside, depending on what we get from Iran,” ING commodities strategist Warren Patterson said.
OPEC and its partners agreed in late 2016 to cut output from 2017 by around 1.8 million barrels per day (bpd) versus October 2016 levels.
Oil fell toward $70 last week, depressed by concern that the trade dispute between the United States and China could undermine global growth and, more concretely, crude consumption in the world’s largest commodities importer.
But China’s independent refiners ramped up their imports of crude oil by 40 per cent in August relative to July after returning from prolonged summer maintenance, according to Reuters data.