Oil futures inched higher on Wednesday, after briefly dipping toward session lows, pressured after a U.S. government agency reported the largest weekly rise of the year in domestic crude inventories.
Prices, however, continued to find some support as traders weighed reported declines in Iranian exports due to pending U.S. oil sanctions.
In a further escalation of relations with Iran, U.S. Secretary Mike Pompeo announced Wednesday that the United States is terminating the 1955 Treaty of Amity, its economic agreement with Iran.
November West Texas Intermediate crude CLX8, +1.52% the U.S. benchmark contract, added 26 cents, or nearly 0.4%, to $75.49 a barrel on the New York Mercantile Exchange, but had dropped near the day’s low of $74.30 immediately after the supply data.
December Brent LCOZ8, +1.69% rose 35 cents, or 0.4%, to $85.15 a barrel on the ICE Futures Europe exchange after tapping lows near $84.
Both contracts have ended higher in three of the past four sessions, settling in the red on Tuesday.
The Energy Information Administration reported Wednesday that domestic crude supplies surged by 8 million barrels for the week ended Sept. 28—the largest weekly climb year to date.
“The 8 million-barrel build in crude was due to a 917,000 [barrel per day] drop in exports, aided by a 163,000 b/d increase in imports,” said James Williams, energy economist at WTRG Economics.
The previous week’s increase of 1.9 million barrels in crude stocks had followed five consecutive weeks of declines. Analysts surveyed by S&P Global Platts had forecast a rise of 2.76 million barrels, while the American Petroleum Institute on Tuesday reported a climb of 907,000 barrels in crude stockpiles.
Gasoline stockpiles fell by 500,000 barrels last week, while distillate stockpiles declined by 1.8 million barrels, according to the EIA. The S&P Global Platts survey had shown expectations for supply declines of 672,000 barrels in gasoline and 1.83 million barrels in distillates.
Prices were petroleum futures saw mixed trading Wednesday. November gasoline RBX8, +0.48% lost 0.5% to $2.116 a gallon, but November heating oil HOX8, +1.20% traded at $2.414 a gallon, up 0.3%.
“The only thing keeping crude from a large move down is the upcoming Iran sanctions, which are going to be implemented in November,” said Tariq Zahir, managing member at Tyche Capital Advisors.
The Trump administration’s decision to pull out of a 2015 international agreement to curb Iran’s nuclear program, and a reimposition of economic sanctions on the third-largest producer of crude—set to kick in next month—has helped to drive oil prices higher because the Organization of the Petroleum Exporting Countries isn’t expected to be able to match the country’s lost output.
Crude bulls, however, aren’t sure if there is more near-term impetus for oil prices to head much higher from current levels.
Stephen Innes, head of trading at Oanda, in a Wednesday note said “oil bulls are sitting tight and are looking for a catalyst to take over the top and clear a path for and the assault on $100 [a barrel],”
Meanwhile, traders were keeping one eye on storm system Leslie, which strengthened to a hurricane in the Atlantic about 505 miles east-southwest of Bermuda. A strong storm holds the possibility of disrupting oil infrastructure in the Gulf of Mexico.
Elsewhere in energy trading, natural-gas prices were on track to tally a third straight session climb—again poised to settle at their highest since January.
“Hot temperatures leading to higher-than-normal air conditioning use for this time of year is helping drive this week’s rally,” said Tyler Richey, co-editor of the Sevens Report. “This breakout has been a long time in the making as inventories remain notably below their five-year and one-year averages.”
November natural gas NGX18, +2.34% added 2.2% to $3.237 per million British thermal units.
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