Oil traded near $69/bbl in New York as falling American stockpiles and the onset of sanctions against Iran pointed to tighter supplies, offsetting concerns over escalating trade tensions between China and the U.S.
Futures were little changed following a one per cent advance over the previous two sessions. Nationwide crude inventories as well as those in the key hub of Cushing, Okla., slipped last week, the American Petroleum Institute was said to report. Meanwhile, the U.S. said Tuesday it will begin imposing tariffs on an additional $16 billion in Chinese imports in two weeks.
Crude has held within a $3 range in August, the tightest monthly spread since 2003, and a measure of price volatility has subsided to the lowest level since May as the market weighs concerns over both demand and supply. President Donald Trump has reaffirmed plans to impose tougher penalties on Iran’s oil sales in November while the U.S.-China trade war is posing a threat to growth in energy consumption.
“Oil looks increasingly sandwiched between the risk to demand in the medium-to-long term from trade wars, and the undetermined risk to supplies in the short-term from Iran sanctions,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “The very tight trading range hides the fact that all is not well.”
West Texas Intermediate crude for September delivery traded at $69.21/bbl on the New York Mercantile Exchange, up 4 cents, at 10:36 a.m. in London, after gaining 16 cents on Tuesday. Total volume traded was about 48 percent below the 100-day average.
Brent for October settlement was 5 cents higher at $74.70/bbl on the London-based ICE Futures Europe exchange, after rising 90 cents on Tuesday. The global benchmark crude traded at a $6.29 premium to WTI for the same month.
U.S. crude inventories fell 6.02 million bbls last week, the API was said to report. That’s more than double the three-million-bbl decline predicted in a Bloomberg survey before Energy Information Administration data due Wednesday. The API also showed supplies stored at Cushing dropped by 576,000 bbls, which would be the twelfth straight week of losses if confirmed by official data.
America’s first round of sanctions hit Iran on Aug. 7 and a second, tougher set targeting oil sales will take effect on Nov. 5. Washington’s reinstatement of sanctions is already isolating the Persian Gulf nation’s economy. German carmaker Daimler AG froze a plan to make Mercedes Benz trucks in Iran, while Total SA said it couldn’t risk investing in Iran because of its large U.S. operations.
© 2018 Bloomberg L.P.