By Bozorgmehr Sharafedin and Alex Lawler
LONDON (Reuters) – Oil rose above $64 a barrel on Tuesday as OPEC supply cuts and Middle East tensions outweighed the U.S.-China trade dispute that is dragging on the global economy and oil demand.
OPEC and its allies last week agreed to extend their supply-cutting deal until March 2020. Brent has risen almost 20 percent in 2019 supported by the pact and also tensions in the Middle East, especially concerns about Iran’s nuclear program.
Brent crude, the global benchmark, rose 38 cents to $64.49 a barrel by 0910 GMT. U.S. West Texas Intermediate crude was up 20 cents to $57.86.
“OPEC and its allies are doing their best to support the market,” said Tamas Varga, an analyst with PVM.
“Oil prices are to hold up reasonably well during coming months or at least they are not to fall out of bed.”
Rising tensions between Iran and the United States have brought the two countries close to conflict. Last month, President Donald Trump called off air strikes at the last minute in retaliation for Iran shooting down a U.S. drone.
Iran on Monday threatened to restart deactivated centrifuges and step up its enrichment of uranium to 20% in a move that further threatens the 2015 nuclear agreement that Washington abandoned last year.
Oil also gained support from reports expected to show a drop in U.S. crudeinventories.
U.S. crude stockpiles are forecast to fall 3.6 million barrels in a fourth consecutive weekly decline. The first of this week’s two supply reports is due at 2030 GMT from the American Petroleum Institute, an industry group.
However, while supply and security concerns supported the market, oil prices remained under pressure with the U.S.-China trade war dampening prospects for global economic growth.
The world’s two largest oil consumers are set to relaunch trade talks this week, although a year after the dispute began there are few signs their differences have narrowed.
“Demand is soft,” said Olivier Jakob, analyst at Petromatrix. “Generally, market participants find the market is fairly well balanced and don’t seem to be too concerned about any potential supply disruptions.”
In a sign that global trade tensions are taking a toll on corporate investment, figures on Monday showed Japan’s core machinery orders fell by the most in eight months. The country is the world’s fourth-largest user of crude.