U.S. and global benchmark oil prices diverged on Tuesday, with concerns about oil supply still acting as a weight on West Texas Intermediate crude.
July WTI CLN8, -1.69% fell by 94 cents, or 1.4%, to $66.94 a barrel on the New York Mercantile Exchange, while July Brent crude LCON8, +0.27% tacked on 67 cents, or 0.9%, to $75.97 a barrel on ICE Futures Europe, following holidays on Monday in the U.S. and U.K.
While oil futures have been pushed lower in recent days by the prospect of increased production, the U.S. benchmark has fallen more of late than Brent. That “is a surprising divergence, as Brent is more exposed than WTI to higher production in Russia and Saudi Arabia,” said Michael McCarthy, chief market strategist at CMC Markets.
Phil Flynn, senior market analyst at Price Futures Group, told MarketWatch that with Brent crude, “there is a perception that supplies are tighter in Europe, and they are more susceptible to feel the loss of Iranian supply.” The U.S. is due to reimpose economic sanctions on Iran after recently deciding to withdraw from its nuclear pact with Tehran.
Traders also “believe that the shale oil will keep WTI grounded, verus the Brent price,” he said. “Even with increases in OPEC production, Europe still needs more light crude to stay supported.”
Oil prices came under pressure last week after media reports that the Organization of the Petroleum Exporting Countries and Russia are discussing plans to lift their production for the first time since 2016. News reports last week said producers were mulling the possibility of pumping as much as 1 million more barrels of oil a day.
OPEC and a group of non-OPEC countries led by Russia have since January 2017 cut production in an effort to tackle the global supply glut that had pulled prices to multiyear lows. Global inventories are now close to OPEC’s target, which has helped push up prices to three-year highs in recent weeks.
Baker Hughes BHGE, -0.37% on Friday reported that the number of active U.S. rigs drilling for oil rose 15 to 859 in the most recent week. That was the largest weekly gain since the week ended Feb. 9. But as U.S. output is already at record highs, that news wasn’t as damaging to crude as OPEC worries.
June natural gas NGM18, -2.72% fell 7.7 cents, or 2.6% to $2.862 per million British thermal unit, ahead of the contract’s expiration at the day’s settlement. July natural gas NGN18, -2.60% which will become the front-month contract, traded at $2.887, down 7.5 cents, or 2.5%.
—Biman Mukherji contributed to this article