By Barani Krishnan
Investing.com - Saudi Arabia reported attacks against its oil industry for a second day in a row Tuesday, but instead of heightened trade war fears to depress the market, U.S. President Donald Trump said he could have a "very fruitful meeting" at the G20 next month with his Chinese counterpart Xi Jinping.
Trump's assuring words, and a triple-digit rebound for Wall Street's Dow after Monday's shock selloff, were enough to put the bulls in charge of Tuesday's action in oil.
West Texas Intermediate futures, the benchmark for U.S. crude, settled up 82 cents, or 1.3%, at $61.86 per barrel, after a session high at $62.09.
London Brent futures, the global benchmark for oil, settled up $1.01, or 1.5%, to $71.24.
Unidentified drones attacked two pumping stations belonging to Saudi Aramco, the state oil company of Saudi Arabia, forcing it to suspend some operations to assess the damage, the government in Riyadh announced Tuesday.
The attacks were reported on the heels of Monday's announcement that two Saudi oil tankers were hit and substantially damaged while heading toward the Strait of Hormuz, the world’s most important chokepoint for oil shipments. The United Arab Emirates added to Monday's tensions by saying four of its own tankers in the Persian Gulf had been targeted at the weekend.
Neither Saudi Arabia nor the U.A.E., however, said exactly what happened to the vessels. With no party claiming responsibility then – and no details of case specifics either that could identify potential culprits – the market quickly took a pass on the story, focusing on news of higher Chinese tariffs on U.S. goods that ultimately drove oil prices lower after their early rally.
In Tuesday's session, however, the Saudi broadcast of the drone attacks at its Aramco pumping stations received greater attention. Pro-Houthi media claimed responsibility for the attacks, saying seven drones were used to target a Saudi oil pipeline. A Houthi spokesman, Mohammad Abdul Salam, on Twitter said the attack was in retaliation for Saudi-led “aggression, genocides and siege” during the four-year war in Yemen.
Trump's remarks that he believed China was still keen to do a trade deal with the U.S. added to investors' risk appetite across markets.
That aside, OPEC's monthly report that its 14 members led by Saudi Arabia had cut output again in April, albeit slightly, gave further impetus to bulls.
OPEC said it pumped 30.03 million barrels per day in April, or nearly 550,000 bpd less than in March.
It also forecast that total world oil supply will increase by 2.22 million bpd in 2019 versus demand growth of 1.21 million. The 1 million bpd difference could give the group legitimacy to extend production cuts at its June meeting with Russia and other world oil producers.
Since December last year, the OPEC+ alliance of world oil producers has been shedding about 1.2 million bpd in supply to help oil prices recover by strongly this year after the market had lost about as much in just the fourth quarter of 2018 on oversupplies. With Tuesday's settlement, WTI is up 36.1%; Brent is up 32.4%.
Retail gasoline was off slightly to $2.86 nationally, according to the American Automobile Association. The average is off 0.8% in May but still up 26.2% for the year.