SINGAPORE: Oil fell as an industry report signalling a jump in US stockpiles eased concerns over a supply crunch, after a drone attack in Saudi Arabia had highlighted the vulnerability of the country’s energy infrastructure.
Futures in New York pared a loss of as much as 1.1% after closing up 1.2% on Tuesday. The American Petroleum Institute was said to report an 8.63 million-barrel increase in crude inventories last week, compared with a forecast of 1.2 million barrel decline in a Bloomberg survey, before government data due Wednesday.
The Yemeni rebel attack on two Saudi pumping stations forced the world’s top oil exporter to temporarily shut its main cross-country crude link.
Oil has swung between gains and losses this month as investors weigh an increasingly tense situation in the Persian Gulf against an escalating US-China trade war that’s threatening to curb demand.
Key producers in the Organisation of Petroleum Exporting Countries will meet in Jeddah, Saudi Arabia this week to review the oil market before a ministerial meeting at which they will decide whether to extend output cuts beyond June.
The reported jump in US crude inventories is “eroding the fear premium from heightened tensions in the Middle East,” said Vandana Hari, the Singapore-based founder of Vanda Insights.
The setback in US-China trade talks is helping the bears prevail over the bulls that are focused on OPEC production cuts, outages and supply risks, she said.
West Texas Intermediate crude for June delivery fell 45 cents, or 0.7%, to US$61.33 a barrel on the New York Mercantile Exchange at 12:46 pm in Singapore.
It dropped as much as 66 cents earlier after closing 74 cents higher on Tuesday.
Brent for July settlement was down 28 cents, or 0.4%, to US$70.96 a barrel on the London-based ICE Futures Europe exchange after advancing 1.4% on Tuesday.
The global benchmark contract is trading at a US$9.44 premium to WTI.
Stockpiles at the storage hub of Cushing rose by 2.06 million barrels, while gasoline and distillates inventories also climbed, the API was said to report.
If the increase in nationwide crude stockpiles is confirmed by Energy Information Administration data it would be the fourth weekly gain this quarter.
A rebel group in Yemen claimed responsibility for the drone attack, with officials in Riyadh highlighting their links to Tehran.
Since an apparent sabotage attack on Saudi oil tankers on Sunday, both of the kingdom’s main crude export routes have come under threat.
Tension in the Middle East has been rising since the White House ended sanction waivers allowing some countries to keep buying Iranian crude.
The US has sent a strike force to the region, although President Donald Trump rejected a report that his administration is planning for war with Iran.
Other oil-market news: Russia will join OPEC+ talks this weekend having barely fulfilled its pledged production cuts, but keen to secure a share of any potential output increase.
OPEC said that rival oil producers are reviving investment in new supplies after last year’s recovery in crude prices.
The escalating trade war offers China a chance to regulate energy imports from the US via tariffs, according to an opinion piece in the Communist Party-run Global Times newspaper. Crude futures in Shanghai rose by 1% to 501.3 yuan a barrel.