il Leaps as Stockpile Drop Adds to Iran Tensions, Gulf Storm
American inventories fall to lowest in three months: EIA
WTI climbs near $60 a barrel; Fed chair hints at rate cuts
By Alex Nussbaum
Oil climbed near $60 a barrel as a steep drop in U.S. crude inventories added to signs of a tightening market from the Middle East to the Gulf of Mexico.
Futures in New York rose as much as 3.5% to $59.84 a barrel on Wednesday, the highest since July 1, amid a rising a tide of bullish developments. American crude stockpiles fell by 9.5 million barrels last week to the lowest level since April, the Energy Department said. President Donald Trump, meanwhile, vowed to increase sanctions on Iran “substantially,” while a storm in the Gulf of Mexico forced offshore drillers to evacuate personnel.
“The market is reacting to the impact of the storm and the price is getting further support from the crude oil inventory draw,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
After plunging almost 5% a week ago, crude has clawed back the losses as Britain’s seizure of a tanker carrying Iranian crude and the risk of retaliationby the Islamic Republic threatened to disrupt supplies. In Washington on Wednesday, Federal Reserve Chairman Jerome Powell said the central bank is concerned about the impact of trade disputes on the economy, but investors took that as an optimistic sign that the Fed is ready to cut interest rates.
West Texas Intermediate crude for August delivery gained $1.94 to $59.77 a barrel at 11:42 a.m. on the New York Mercantile Exchange. The contract has rallied about 6% since last Tuesday.
Brent for September settlement increased $2.24 to $66.40 a barrel on the ICE Futures Europe Exchange. The global benchmark crude traded at a $6.54 premium to WTI for the same month.
“We started the morning pretty strong and on top of that the tropic depression in the Gulf was already leading us higher,”said Brian Kessens, a portfolio manager and managing director at Tortoise Capital Advisors LLC in Leawood, “And Powell certainly didn’t hurt any markets with his dovish comments.”
The chief of staff for Iran’s armed forces vowed on Tuesday to respond to Britain’s seizure of the tanker off the coast of Gibraltar last week. The incident came after six vessels were attacked near the Strait of Hormuz since mid-May, which has raised tensions around the biggest global choke-point for crude.
“The declining American inventories and Iran’s warmongering rhetoric pave the road further for bulls to make a comeback,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “But it promises to be a bumpy road ahead as there’s still a lot of concern about declining energy demand.”
Other oil-market news:
Gasoline futures 2.4% to $1.9733 a gallon.
The White House is discussing a renewal of Chevron Corp.’s license to operate in Venezuela despite sanctions on the country, said top economic adviser Larry Kudlow.
Worldwide investments in clean energy projects have hit a six-year low, according to a report by BloombergNEF.
With assistance from James Thornhill, Sharon Cho, Grant Smith and Harkiran Dhillon.
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