Oil traded near $68 a barrel as traders weighed increasing U.S. stockpiles against growing expectations of renewed sanctions on Iran’s crude trading.
Futures in New York increased 0.6 percent after a 1.9 percent drop on Tuesday. U.S. crude inventories rose 3.43 million barrels last week, the American Petroleum Institute was said to report. That compares with a 1.23 million-barrel gain in a Bloomberg poll of analysts ahead of Wednesday’s government data. The oil market has priced in a more than 50 percent probability that the U.S. will sanction Iran, according to Standard Chartered Plc.
Oil rallied to a three-year high last month ahead of the decision on Iran by President Donald Trump and as conflicts in the Middle East heat up. While the U.S. continues pumping record amounts of crude, Goldman Sachs Group Inc. expects only a “moderate” response to higher prices from American shale producers. It also sees an increasing likelihood that the Organization of Petroleum Exporting Countries and allies will extend their supply cuts through next year.
“The geopolitical risk forces are strong,” said Bjarne Schieldrop, chief commodities analyst at SEB A/B in Oslo. “For the time being, the risk for the oil price is on the upside.”
West Texas Intermediate crude for June delivery rose as much as 60 cents to $67.85 a barrel on the New York Mercantile Exchange and traded at $67.68 at 10:10 a.m. in London. The contract dropped $1.32 on Tuesday. Total volume traded Wednesday was about 14 percent below the 100-day average.
Brent crude for July settlement rose 16 cents to $73.29 a barrel on the London-based ICE Futures Europe exchange, after slipping $1.56 on Tuesday. The global benchmark crude was at $5.78 premium to July WTI.
Futures for September delivery were 0.3 percent lower at 441.2 yuan per barrel on the Shanghai International Energy Exchange. Trading on the bourse was closed on Monday and Tuesday for Chinese public holidays.
If the API’s stockpiles data is reflected in the government announcement, it would be the biggest build since early March. The industry body was also said to show crude inventories in the American oil-storage hub of Cushing, Oklahoma, rose by 725,000 barrels last week. Gasoline stocks increased by 1.6 million barrels while distillates declined 4.08 million.
Sanctions in Focus
The U.S. decision on the Iranian nuclear deal remains in focus after Israeli Prime Minister Benjamin Netanyahu said earlier this week that his country has documents that prove Tehran had a secret nuclear weapons program. Iranian Foreign Minister Javad Zarif on Twitter called Netanyahu’s claims “a rehash of old allegations.” A re-imposition of sanctions could disrupt exports from Iran, which shipped a record amount of crude last month.
Other oil-market news:
Though a majority of the risk from sanctions on Iran is already priced in, there’s still “significant upside” should the curbs actually be reinstated, Standard Chartered said. The bank signaled it will boost its 2018 average Brent forecast by $4 to $75 a barrel if the sanctions kick in. American refineries are set to increase their intake of light, low-sulfur crude in the next few years as long as shale oil continues to drive growth in U.S. production. OPEC continues to over-deliver on its production cuts, with output falling further last month as the group nears its goal of rebalancing the oil market.