Nerijus Adomaitis | Reuters
A U.S. threat to slap tariffs on hundreds of European goods and a downgrade by the International Monetary Fund in its global economic growth forecasts took the steam out of the rally in global equities and also added to concerns that a slowdown this year will hit fuel consumption and prevent crude prices from rising even higher.
Supply curbs led by OPEC and allies like Russia have underpinned a more than 30 percent rally this year for Brent crude, despite downward pressure from fears of an economic slowdown.
Brent, the global benchmark, rose to $71.34 a barrel, the highest since November, before falling 37 cents to $70.73 around 1:35 p.m. ET (1735 GMT).
U.S. crude also hit a high going back to November 2018 at $64.79, but was last down 28 cents at $64.11.
Russia, a participant in the OPEC-led supply cuts that currently expire in June, signaled on Monday it wanted to raise output when it meets with OPEC because of falling stockpiles.
On Tuesday, President Vladimir Putin said Russia did not support an uncontrollable rise in oil prices and that the current price suited Moscow.
Russian Energy Minister Alexander Novak said there would be no need to extend the supply-curbing deal if the market was expected to be balanced in the second half of the year.
U.S. sanctions on Iran and Venezuela have deepened the OPEC supply cut and concern has grown this week about the stability of Libyan output. The OPEC member pumps around 1.1 million barrels per day, just over 1 percent of global supply.
The eastern Libyan National Army forces of Khalifa Haftar - a former general in ousted strongman Muammar Gaddafi’s army - which seized the sparsely populated but oil-rich south earlier this year, closed in on the internationally recognized government in Tripoli, with casualties from the battle for Libya’s capital mounting on Tuesday.
The Libyan state oil firm NOC met with oil operating firms to discuss security at oil fields and allow production to continue, a company statement said on Tuesday.
Rising U.S. crude production and inventories also weighed on the market.
U.S. crude production was expected to rise 1.43 million bpd in 2019 to average 12.49 million bpd, the U.S. Energy Information Administration said on Tuesday, up from its previous forecast for a rise of 1.35 million bpd.
U.S. crude stockpiles were forecast to have risen 2.3 million barrels last week, the third straight weekly build.
The American Petroleum Institute, an industry group, issues its supply report at 4:30 p.m. ET (2030 GMT), ahead of Wednesday’s official figures from the Department of Energy.
“I think what’s really giving the market pause is that nobody can actually come close to predicting what’s going to happen in tonight’s API report,” Phil Flynn, analyst at Price Futures Group in Chicago.