U.S. crude oil trades near a three-week high after rally fueled by Israel-Iran tension

U.S. crude oil prices traded close to a three-week high Tuesday, after rallying on Monday in anticipation of an attack by Iran against Israel that could play havoc with Mideast production and transportation.

“The oil market’s concern is that a broader conflict between Israel and Iran could cause oil supply disruptions in and around the Strait of Hormuz, through which about 20% of the world’s seaborne crude supply is shipped,” Henning Gloystein, head of energy at the Eurasia Group, wrote to clients in a research note.

Here are Tuesday’s energy prices:

• West Texas Intermediate September contract: $79.68 per barrel, down 38 cents, or 0.47%. Year to date, U.S. crude oil has gained 11.2%.
• Brent October contract: $81.85 per barrel, down 45 cents, or 0.55%. Year to date, the global benchmark is ahead 6.3%.
• RBOB Gasoline September contract:  $2.42 per gallon, down more than 1 cent, or 0.63%. Year to date, gasoline is up 15.5%.
• Natural Gas September contract: $2.20 per thousand cubic feet, up more than 1 cent, or 0.91%. Year to date, gas is lower by 12%.

“These risks remain low-probability events, which helps explain the modest increase in prices,” Gloystein wrote. But prices eased slightly Tuesday as a strike by Iran had not yet materialized.

Demand concerns also weighed on the market after the International Energy Agency forecast a crude oil surplus next year even if OPEC keeps production cuts in place, due to output in Brazil, Canada, Guyana and the U.S.

OPEC on Monday lowered its demand growth forecast by 135,000 barrels per day this year citing softness in China.

Rob Ginsberg, managing director at Wolfe Research, said U.S. crude could rise above a resistance level of $84 per barrel. “Once out, mid to high $90s isn’t crazy,” Ginsberg said.