Oil Trades Near $71 as Rising Supply Counters Middle East Risk

Oil traded near $71 a barrel as rising stockpiles and signs of slower demand growth countered concerns Iranian supplies will soon be curbed by sanctions.

Futures dropped as much as 0.7 percent in New York. The International Energy Agency trimmed estimates for demand growth, and boosted those for supply, as prices have jumped to three-year highs. U.S. industry data was said to show crude inventories rose last week. The European Union and Iran are identifying ways to maintain oil shipments from Iran, easing fears of a supply drop-off.

“The market is less tight than hitherto assumed,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Non-OPEC supply is growing more strongly than previously anticipated.”

Crude has rallied this month after U.S. President Donald Trump pulled out of a nuclear agreement with world powers that had eased sanctions on Iran in exchange for curbs on its atomic program. The Organization of Petroleum Exporting Countries and its allies have also finally succeeded in clearing a global glut, the IEA said. Yet rising prices could be backfiring by slowing demand growth and boosting supply from countries like the U.S.

West Texas Intermediate crude for June delivery dropped as much as 49 cents to $70.82 a barrel on the New York Mercantile Exchange, and traded at $71.08 as of 8:49 a.m. local time. Total volume traded was 2 percent below the 100-day average.

Brent for July settlement lost 55 cents to $77.88 a barrel on the London-based ICE Futures Europe exchange, after adding 20 cents on Tuesday. The global benchmark crude traded at a $6.75 premium to WTI for July.

Futures for September delivery on the Shanghai International Energy Exchange were little changed at 473.1 yuan a barrel after gaining 1.6 percent Tuesday.

The American Petroleum Institute was said to report U.S. crude stockpiles climbed 4.85 million barrels last week, and that inventories at the key pipeline and storage hub Cushing, Oklahoma, rose 62,000 barrels. Gasoline stocks declined by 3.37 million barrels, according to the API.

The nationwide inventory estimate contrasts with forecasts in a Bloomberg survey that show stockpiles declined by 2 million barrels. Government data is due later Wednesday.

European Union foreign policy chief Federica Mogherini said Tuesday the bloc’s aim is “maintaining and deepening economic relations with Iran.” Investors are keeping a close watch on how much crude will end up being removed from the global market, and whether other major producers will ramp up output to fill any gaps.

Oil-market news:

Spain’s Repsol SA will no longer seek growth for its oil and gas business in preparation for the global transition to cleaner energy, according to a person familiar with the matter. ConocoPhillips is asking courts from London to Hong Kong to help it recover about $2 billion it’s owed by Venezuela’s state-owned oil giant. Petroleos Mexicanos plans to hedge about a third of its production next year against volatility in oil prices, Chief Executive Officer Carlos Trevino said in an interview.