SINGAPORE: Oil climbed for a third day in the longest run of gains in three weeks as falling US gasoline stockpiles supported the demand outlook and simmering tensions in the Middle East kept investors on edge.
Futures in New York rose as much as 0.9% after adding 1.6% over the previous two sessions. American gasoline inventories dropped by 1.12 million barrels last week, more than three times as much as forecast, official data showed Wednesday. Saudi Arabia restarted its main cross-country oil pipeline after a drone attack by Iran-backed rebels, while the US ordered all non-emergency staff to leave Iraq due to an ‘increased threat stream.’
The attacks on the pipeline and oil tankers in recent days have highlighted the vulnerability of energy infrastructure to a major conflict in the Middle East as relations between the US and Iran deteriorate. Washington and Beijing’s intensifying trade war has kept a lid on price gains, while a meeting of the Organization for Petroleum Exporting Countries and its allies in Jeddah this weekend will be watched for clues on whether output cuts will be extended.
‘Prices are supported as the regional conflict in the Middle East is continuing to stay heightened when global supplies are tight,’ said Sungchil Will Yun, a commodities analyst at HI Investment & Futures Corp. in Seoul. ‘With the uncertainty surrounding the situation in the Gulf, there’s a lack of bearish factors in the short term.’
West Texas Intermediate crude for June delivery increased 38 cents, or 0.6%, to US$62.40 a barrel on the New York Mercantile Exchange at 2:37 p.m. in Singapore. It’s headed for the highest close in more than two weeks after finishing up 0.4% on Wednesday.
Brent for July settlement rose 38 cents, or 0.5%, to US$72.15 a barrel on the London-based ICE Futures Europe exchange after advancing 0.7% on Wednesday. The global crude benchmark traded at a US$9.54 premium to WTI, near the widest gap since February.
While American gasoline inventories fell last week, nationwide crude stockpiles increased by more than 5.4 million barrels to 472 million barrels, according to the Energy Information Administration data. Inventories at the storage hub of Cushing rose for a fourth week.
The tension in the Middle East has risen this month after the White House moved to try and squeeze Iranian oil exports to zero. Most employees at the US embassy in Baghdad and the consulate in Erbil, in the majority Kurdish region, will leave, according to an embassy statement Wednesday that didn’t give more details. Meanwhile, the Iraqi oil ministry denied a report that Exxon Mobil Corp. employees were being pulled out of the country.
The OPEC+ technical and monitoring committees gather in Saudi Arabia this weekend for a meeting that won’t include Iran. Russian Energy Minister Alexander Novak said the group plans to discuss the output reduction agreement. That was after OPEC Secretary-General Mohammad Barkindo said it was too early to talk about extending the production cuts and a decision would be made at the ministerial meeting in June.
Other oil-market news: US crude is reaching new destinations around the world after Chinese buying slowed amid concern the trade dispute between the countries could result in a tax on American oil. Global oil demand will grow more slowly than previously thought following an economic lull in Asia, the International Energy Agency said, while warning that supplies will likely tighten due to US sanctions on Iran. Japan’s Nippon Yusen KK told its fleet to avoid the Middle Eastern refueling hub of Fujairah after violent attacks on ships and oil infrastructure in the region. Crude futures rose 1.2% to 506.9 yuan a barrel in Shanghai.