Oil futures moved up in Asian trading as investors weighed a delicate mix of geopolitical risk and fresh U.S. economic data. Persistent U.S.-Iran tensions pushed traders to add a risk premium to crude, but stronger-than-expected American employment figures and a large weekly build in U.S. oil inventories restricted the scale of the rally.
Price moves
By 21:19 ET (02:19 GMT), Brent crude for April delivery was up 0.4% at $69.64 a barrel, while West Texas Intermediate futures rose 0.4% to $64.74 a barrel.
Geopolitical concerns lift risk premium
Market participants signaled greater concern about supply disruption risk as reports circulated that Washington is considering sending a second aircraft carrier to the region. Although talks held over the weekend between Iran and the U.S. were described as showing some progress, there was no conclusive outcome on Tehran's nuclear activities, leaving uncertainty in place.
Additional reporting that U.S. officials are weighing the seizure of oil tankers carrying Iranian crude added to unease. A meeting between the U.S. President and the Israeli Prime Minister produced few clear signals for markets, and investors remain mindful that any escalation in the Middle East could interrupt production and shipments from a region that supplies a large share of the world's oil.
U.S. economic data and inventories cap upside
Fresh U.S. economic releases delivered a mixed message to oil traders. January nonfarm payrolls came in stronger than expected, indicating continued resilience in the U.S. economy and supporting expectations for sustained fuel demand from the world's largest energy consumer.
However, the stronger payrolls figures also reduced the market's expectations for near-term interest rate cuts, which in turn supported the dollar and limited oil's upside momentum.
At the same time, weekly data showed a much larger-than-anticipated build in U.S. crude stocks - an addition of 8.5 million barrels - which tempered bullish sentiment. The inventory increase suggested a partial reversal of the tightness seen earlier, when extreme cold weather at the start of the year disrupted domestic production across the United States.
Near-term demand watch: Lunar New Year
Outside the United States, market focus will shift toward consumer mobility in China as Lunar New Year holidays begin in the coming week. The holiday period historically brings a surge in travel within the country and is typically associated with a rise in fuel usage. Traders will monitor whether Chinese travel patterns support an increase in oil demand over the holiday window.
Bottom line
Prices are trading higher on renewed geopolitical risk related to U.S.-Iran tensions, but gains remain modest given stronger U.S. employment data, a firmer dollar, and a large weekly increase in U.S. crude inventories. Attention now turns to Chinese travel demand during Lunar New Year to gauge near-term consumption trends.