Geopolitical tension in the driver's seat for oil prices

Aug. 9 (UPI) -- Crude oil prices were on solid black territory in early Wednesday trading as geopolitical tensions escalated between the United States and North Korea.

Crude oil prices drifted into negative territory for most of the Tuesday session and closed lower even after Washington offered a bellicose response to North Korean nuclear threats against the United States.

Traders were moving Tuesday on data from the American Petroleum Institute, which offered a bearish reading of U.S. crude oil inventories in Cushing, Okla., the key storage hub in the United States. Gasoline inventories, which offer a loose indication of the demand from the transportation sector, increased by more than 1 million barrels.

North Korea continued the pressure Wednesday with a response to U.S. President Donald Trump's threat of a response "like the world has never seen."

"The U.S. imperialists have to clearly understand that both 'preemptive attack' and 'preventive war' will all end in their final ruin," North Korea's official news agency reported.

London oil broker PVM said Tuesday that geopolitical issues were influencing crude oil prices, especially when matters relate to simmering tensions with Qatar, situated near the key oil choke point in the Persian Gulf.

Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter that war rhetoric has more of a profound impact.

"It is a question one would not like to bring up but it is one that sadly, at some point, we may have to deal with," he said. "Oil producers still must do business and provide services and consumers will still need oil. War, at least conventional war, is generally bullish for oil."

The price for Brent crude oil in the moments before the start of trading in New York was up 0.84 percent to $52.58 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.77 percent to $49.55 per barrel.

Markets will be influenced later in the day when the U.S. Energy Information Administration releases official data on oil and gasoline inventories. A survey from S&P Global Platts this week estimated U.S. crude oil stocks would fall by 2.5 million barrels and gasoline inventories would decline by 1.25 million barrels.

Data from the API tends to be the most bullish of the weekly reports.

On the economic front, roughly a decade after the onset of the global recession, European leaders said the downturn is largely in the rear-view mirror and the European economy is now is stronger than before.