Oil futures climbed Wednesday, reversing an earlier skid, as investors focused on rising Middle East tensions, despite an unexpected climb in U.S. crude supplies and signs of sluggish oil demand.
West Texas Intermediate crude for June delivery
tacked on 5 cents, or less than 0.1%, to $61.83 a barrel on the New York Mercantile Exchange, after tapping a low of $60.85. The global benchmark, July Brent
was up 31 cents, or 0.4%, to $71.55 a barrel on ICE Futures Europe.
U.S. crude supplies rose by 5.4 million barrels for the week ended May 10, according to a report from the Energy Information Administration released Wednesday. Analysts and traders expected a fall of 1.4 million barrels, on average, according to a Wall Street Journal survey.
By comparison, data from the American Petroleum Institute on Tuesday showed an increase of 8.6 million barrels, according to sources.
The EIA report also showed that gasoline inventories were down 1.1 million barrels, while distillate stockpiles edged up by 100,000 barrels last week. The WSJ survey had shown expectations for supply declines of 600,000 barrels for gasoline and 500,000 barrels for distillates.
Commenting on the EIA figures, Tariq Zahir, managing member at Tyche Capital Advisors said that “while draws were expected across the whole complex, we saw builds across everywhere.” The surprise climb “should keep a lid on prices,” particularly coupled with the fact that the International Energy Agency cut its crude demand forecast.
In a monthly report Wednesday, the IEA trimmed its forecast for oil-demand growth for 2019 by 90,000 barrels a day to 1.3 million barrels, but said it expected the slower growth to be short-lived.
Still, “geopolitical headlines” remain supportive factors for oil prices, Zahir said.
The U.S. on Wednesday ordered all nonemergency staff to leave Iraq immediately amid heightened tensions with Iran over recent attacks against oil tankers and facilities in the Persian Gulf region.
While the aggressive stance toward Iran “has clearly added an element of strong geopolitical unease to the world’s major oil exporting region, and if it weren’t for strong U.S. supply growth and a sluggish economic/demand performance, even the tentatively price-cautious JBC Energy Research Center would have expected prices to rally much more and set new year-to-date highs,” wrote analysts at JBC Energy, a Vienna-based consulting firm, in a note.
“But let’s not forget, on the thus-far-still-minor-chance of a full escalation in the Middle East, there is not much that would stop prices from reaching the highs of last year and maybe even spike beyond,” they said.
In energy products trade, June natural gas
shed 4.3 cents, or 1.6%, at $2.616 per million British thermal units ahead of Thursday’s EIA supply update.
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