Oil pares gains, market supported by Iran worries

Source Bureau of Safety and Environmental Enforcement via Flickr

Source Bureau of Safety and Environmental Enforcement via Flickr

After yesterday the American Petroleum Institute served a not so pleasant surprise to oil bulls by reporting a 3.43-million-barrel increase in crude oil inventories in the United States, the Energy Information Administration confirmed the bad news, estimating a 6.2-million-barrel increase in USA oil inventories for the week to April 27.

Futures in NY increased 0.6 percent after a 1.9 percent drop on Tuesday.

Elsewhere, U.S. crude production jumped 260,000 barrels per day (bpd) to a record high of 10.26 million bpd in February, the Energy Information Administration said on Monday.

Refinery crude runs fell by 60,000 barrels per day and refinery utilization rates rose by 0.3 percentage points to 91.1 percent of total capacity, EIA data showed.

The oil market has priced in a more than 50 percent probability that the US will sanction Iran, according to Standard Chartered Plc.

Trump attacked OPEC last month for higher prices, even though his own threats to the Iran deal have also played a role.

"If Trump abandons the deal, he risks a spike in global oil prices", said Ole Hansen, head of commodity strategy at Saxo Bank, adding that reintroducing US sanctions could remove 300,000-500,000 bpd of Iranian oil from global supplies.

United States crude oil stocks rose sharply last week, bringing overall supply to its highest level since December.




"The geopolitical risk forces are strong", said Bjarne Schieldrop, chief commodities analyst at SEB A/B in Oslo. The contract dropped $1.32 to close at $67.25 on Tuesday.

U.S. West TexasIntermediate (WTI) crude futures were up 15 cents, or 0.2 percent, at $67.40 per barrel.

Stay long a December 2018 WTI $68-75/bbl call spread (net premium: $1.40/bbl).

Trading on the Shanghai International Energy Exchange was closed for a Chinese public holiday.

If the API's stockpiles data is reflected in government data, it would be the biggest build since early March.

Iran's crude and condensate exports in April were 2.87 million barrels a day, Shana reported.

Some of the impact, however, may be dampened by a decline in US gasoline stocks of about 1 million barrels, compared with a historic average of 175,000 barrels in spare capacity.

The US decision on the Iranian nuclear deal also 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. Hopefully war will be avoided, but if it breaks out, some analysts see a potential price spike as high as $250 per barrel.

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