Oil futures extended a rise Wednesday, with Brent crude nearing the $75-a-barrel threshold while West Texas Intermediate was boosted by industry data showing a large fall in domestic inventories.
West Texas Intermediate crude for July delivery rose 27 cents, or 0.4%, to $72.39 a barrel on the New York Mercantile Exchange. August Brent crude the global benchmark, was up 37 cents, or 0.5%, at $74.36 a barrel on ICE Futures Europe. WTI on Tuesday logged its highest close since Oct. 10, 2018, while Brent finished at its highest since April 2019.
Crude added to gains in late Tuesday when the American Petroleum Institute reported that U.S. crude supplies fell by 8.5 million barrels for the week ended June 11, according to sources. The API data reportedly also showed gasoline stockpiles up by nearly 2.9 million barrels, while distillate inventories climbed by almost 2 million barrels.
Crude stocks in Cushing, Okla., the delivery hub for Nymex futures, edged down by 1.5 million barrels for the week, sources said.
More closely followed inventory data from the Energy Information Administration will be released Wednesday morning. On average, the EIA is expected to show crude inventories down by 4.2 million barrels, according to a survey of analysts conducted by S&P Global Platts. The survey also calls for gasoline supplies to stand unchanged for the week, while distillate stockpiles climb by 200,000 barrels.
Crude oil “has gone on an absolute rampage lately,” storming to another round of highs “after the private API report showed a huge drawdown in U.S. inventories, fueling hopes that stored supply is being absorbed quickly as demand returns with force,” said Marios Hadjikyriacos, investment analyst at XM, in a note.
At the same time, expectations are fading for an agreement that would see Iran move back into compliance with the 2015 nuclear treaty and the U.S. rejoin the agreement, lifting sanctions on Tehran, ahead of Iran’s presidential election at the end of the week.
“While the diplomats remain optimistic a deal is within reach, the market seems to have concluded that the time window to reach an accord has already closed with Iranian elections scheduled on Friday. A deal is still possible, but perhaps not immediately, adding momentum to oil prices,” Hadjikyriacos said.
The prospect of a deal in coming months, however, remains strong, said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note.
“The election outcome is unlikely to alter the course of the nuclear negotiations as Supreme Leader Khamenei has seemingly blessed the Vienna talks in order to secure sanctions relief,” she wrote. Khamenei may have “slow walked” a signing of the agreement in order to boost the electoral prospects of Chief Justice Ebrahim Raisi’s electoral prospects.
Croft said an agreement is likely before the incumbent president, Hassan Rouhani, and Foreign Minister Mohammad Javid Zarif leave office in August, with an additional 1 million barrels a day of Iranian exports likely to hit the market in the fourth quarter.