* Saudi Arabia says oil facilities outside Riyadh attacked
* US says Iran proxies may be behind tanker attack, Tehran
denies
* U.S. and China express positive sentiments on trade talks
* OPEC sees world demand for its oil higher than expected
* Graphic: OPEC production https://tmsnrt.rs/2VXGPMh
* Coming Up: U.S. API oil storage report at 2030 GMT on
Tuesday
(Adds latest prices, moves API report higher)
By Scott DiSavino
NEW YORK, May 14 (Reuters) - Oil prices rose over 1% on
Tuesday after top exporter Saudi Arabia said explosive-laden
drones launched by a Yemeni-armed movement aligned to Iran had
attacked facilities belonging to state oil company Aramco.
That move higher comes as the market waits for a report from
the American Petroleum Institute (API), an industry group, which
is expected to show U.S. crude stockpiles fell by 800,000
barrels last week, their second decline in a row, according to
analysts in a Reuters poll. EIA/S
The poll was conducted ahead of weekly reports from API at
4:30 p.m. EDT (2030 GMT) on Tuesday and the U.S. Energy
Information Administration (EIA) at 10:30 a.m. EDT on Wednesday.
Brent LCOc1 futures gained $1.01, or 1.4 percent, to
settle at $71.24 a barrel, while U.S. West Texas Intermediate
crude CLc1 gained 74 cents, or 1.2 percent, to $61.78.
That was the highest settle for Brent since May 6 and WTI
since May 8 and caused the closing premium of Brent over WTI
WTCLc1-LCOc1 to rise to a nine-week high.
Saudi Arabia said armed drones had struck two oil pumping
stations in the kingdom on Tuesday in what it called a
"cowardly" act of terrorism two days after Saudi oil tankers
were sabotaged off the coast of the United Arab Emirates.
U.S. national security agencies said they believe proxies
sympathetic to or working for Iran may have been responsible for
the tanker attacks rather than Iranian forces themselves.
Iranian officials denied responsibility. Tehran has been embroiled in an escalating war of words with
the United States over stricter U.S. sanctions, which have cut
its oil exports and tightened global supply.
A fifth of global oil consumption passes through the Strait
of Hormuz from Middle East crude producers to global markets.
"With rising tensions between Iran and the U.S., and with
significant naval build-up in the region, markets are sensitive
to news and can be tipped by the smallest signs of a conflict,"
said Mihir Kapadia, chief executive of Sun Global Investments.
The Organization of the Petroleum Exporting Countries said
on Tuesday that world demand for its oil would be higher than
expected this year as supply growth from rivals including U.S.
shale producers slows, pointing to a tighter market if the
exporter group refrains from raising output. U.S. oil output from seven major shale formations, however,
is expected to rise to a fresh peak of about 8.5 million barrels
per day in June, the U.S. Energy Information Administration said
in a report on Monday. The market was also holding out some hope for U.S.-China
trade talks as both sides expressed positive sentiments, which
may signal the negotiations are not yet dead.
The talks appeared headed towards success last week but have
largely unravelled over U.S. accusations that Beijing sought
vast, last-minute changes.
China on Monday ignored a warning from U.S. President Donald
Trump and moved to impose higher tariffs on a range of U.S.
goods including liquefied natural gas (LNG). "Volatile prices have remained the theme of today's trading
session. Heightened geopolitical tensions in the Middle East and
anticipation that the United States and China could still reach
an amicable solution to their trade dispute have rendered
support to oil prices," said Abhishek Kumar, head of analytics
at Interfax Energy in London.
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GRAPHIC: OPEC oil production https://tmsnrt.rs/2VXGPMh
TECHNICALS: Brent oil may fall more to $68.37 U.S. oil may fall more to $59.31 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>