Oil Gains Before Supply Data While U.S. Taps Strategic Reserves

Oil rose in low trading volumes before weekly crude inventory data in the U.S., where the government is proceeding with further sales of crude from its strategic reserves.

Futures in New York added 1.2 percent. The U.S. government will offer 11 million barrels of crude from its Strategic Petroleum Reserve as part of a regular draw-down schedule. While the move also comes amid renewed American sanctions against Iran’s oil sales, it’s too small to be intended to compensate, according to BNP Paribas SA. America’s commercial crude inventories are estimated to have fallen last week.

“Considering the amount of Iran exports that may be potentially lost, we are talking a very different order of magnitude,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London. “Offsetting losses from Iran will take an increase in production, notably from Saudi Arabia.”

Oil capped a seventh weekly decline last week amid uncertainty over the U.S.-China trade standoff and the risk of economic turmoil in Turkey spilling over into other emerging markets. Investors are also closely watching supplies from the U.S. and the Organization of Petroleum Exporting Countries before U.S. sanctions on Iran’s oil take effect in November. The measures may curb the Persian Gulf nation’s exports by as much as 1 million barrels a day.

West Texas Intermediate crude for September delivery, which expires on Tuesday, rose 1.2 percent to $67.22 a barrel on the New York Mercantile Exchange at 1:37 p.m. in London. The contract climbed 52 cents to $66.43 on Monday. The October contract rose 43 cents to $65.85. Total volume traded Tuesday was about 50 percent below the 100-day average.

Brent for October traded at $72.60 a barrel on the London-based ICE Futures Europe exchange, up 39 cents. Prices on Monday advanced 38 cents yesterday to close at $72.21. The global benchmark crude traded at a $6.73 premium to WTI for the same month.

The U.S. release from its crude reserves might be needed when it hits the market from October to December, said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. Renewed U.S. sanctions against Iran will take full effect in early November, followed by American midterm elections on Nov. 6.

Stockpile Slide

U.S. crude stockpiles are forecast to have declined by 2 million barrels last week following a surprise gain a week earlier, according to a Bloomberg survey of analysts before the Energy Information Administration’s data is due to be published Wednesday. Inventories at the Cushing storage hub in Oklahoma rose 900,000 barrels last week, according to a survey compiled by Bloomberg.

Investors are also awaiting trade talks between China and the U.S., and a speech by Federal Reserve Chairman Jerome Powell later this week.

Powell’s remarks at the Jackson Hole gathering in Wyoming on Aug. 24 will be closely watched as investors seek clues on the outlook for the central bank’s plans. The Federal Reserve chairman’s speech comes after President Donald Trump was said to lament at a fundraiser last week that Powell had raised interest rates.

In Washington, a Chinese delegation led by Vice Commerce Minister Wang Shouwen will meet its U.S. counterparts for trade talks after earlier talks broke down. The announcement last week that the two countries are returning to the negotiation table spurred optimism a full-blown trade war could be averted. Negotiations between the U.S. and China are scheduled for August 22 and 23, the Wall Street Journal reported.

Other oil-market news:

A strike at the North Sea Alwyn, Dunbar and Elgin oil and gas fields has started. Total SA has formally ended its contract for Phase 11 of the Iranian South Pars gas field, Oil Minister Bijan Namdar Zanganeh said, according to ICANA, the official news agency of the Iranian parliament. China’s shipowners are shunning Iran’s oil, while the OPEC producer is using its own tankers to supply top customers as impending U.S. sanctions threaten to disrupt global crude trade. Saudis are seeking to cap upside in prices in response to consumer concerns, and also put a floor under them to ensure high revenues, according to a report from Oxford Institute for Energy Studies.