Oil fell as an industry report signaling a jump in U.S. stockpiles eased concerns over a supply crunch, even after a drone attack in Saudi Arabia highlighted the vulnerability of the country’s energy infrastructure.
Futures in New York declined 0.7% after closing up 1.2% on Tuesday. The American Petroleum Institute was said to report an 8.63 million-barrel weekly increase in crude inventories, calming supply fears after a Yemeni rebel attack on two Saudi pumping stations forced the kingdom to suspend its main cross-country crude link. In a further sign of tensions in the Persian Gulf, the U.S. ordered all non-emergency American government staff to leave Iraq.
Oil has swung between gains and losses this month as investors weigh an increasingly tense situation in the Gulf and supply disruptions in other OPEC nations against an escalating U.S.-China trade war that threatens to curb crude consumption. The International Energy Agency on Wednesday cut its demand-growth forecast, citing weak economic data in Asia.
“We’ve become used now to the ongoing supply worries,” IEA Head of Oil Industry and Markets Neil Atkinson said in a Bloomberg Television interview. The latest attacks in the Gulf appear not to have caused any “sustained damage” and the market “remains focused on the underlying fundamentals.”
West Texas Intermediate crude for June delivery fell 45 cents, or 0.7%, to $61.33 a barrel on the New York Mercantile Exchange at 10:26 a.m. London time. It dropped as much as 78 cents earlier, after closing up 74 cents on Tuesday.
Brent for July settlement was down 23 cents, or 0.3%, at $71.01 a barrel on the London-based ICE Futures Europe exchange after advancing 1.4% on Tuesday. The global benchmark contract traded at a $9.47 premium to WTI.
In the U.S., stockpiles at the Cushing storage hub rose by 2.06 million barrels last week, while gasoline and distillate inventories also climbed, the API was said to report. If the increase in nationwide crude stocks is confirmed by government data later on Wednesday, it would be the fourth weekly gain this quarter. Nevertheless, a Bloomberg survey predicts a decline.
A rebel group in Yemen claimed responsibility for the drone attack in Saudi Arabia, with officials in Riyadh highlighting their links to Tehran. Since an apparent sabotage incident on Saudi oil tankers on Sunday, both of the kingdom’s main crude export routes have come under threat.
Tension in the Middle East has been rising since the White House ended waivers that had allowed some countries to keep buying Iranian crude amid sanctions. The U.S. has sent a strike force to the region, although President Donald Trump rejected a report that his administration is planning for war with Iran.
Other oil-market news: Russia will join OPEC+ talks this weekend in Jeddah, having barely fulfilled its pledged production cuts but keen to secure a share of any potential output increase. OPEC said that rival oil producers are reviving investment in new supplies after last year’s recovery in crude prices. The IEA said in its monthly report that Iranian crude output fell by 130,000 barrels a day in April, and could sink this month to levels not seen since the 1980s war with Iraq. Exports of the Permian Basin’s newest kind of oil — West Texas Light — are set to jump as production surges, exceeding the appetite of U.S. refiners.