Oil futures finished higher Wednesday, with the global crude prices posting its highest settlement in two weeks, as investors focused on rising Middle East tensions, despite an unexpected climb in U.S. crude supplies and signs of sluggish oil demand.
“The various threats to global supply are keeping the market on edge, from the Persian Gulf to Venezuela,” said Marshall Steeves, energy markets analyst at Informa Economics. “Supply disruptions come as higher tariffs threaten global growth, and that has been sustaining high volatility overall.”
Against that backdrop, the global benchmark, July Brent LCON9, +0.65% added 53 cents, or 0.7%, to settle at $71.77 a barrel on ICE Futures Europe—the highest finish for a front-month contract since May 1, according to Dow Jones Market Data. West Texas Intermediate crude for June delivery CLM9, +0.74% tacked on 24 cents, or 0.4%, to settle at $62.02 a barrel on the New York Mercantile Exchange, the highest finish since May 8.
U.S. crude supplies rose by 5.4 million barrels for the week ended May 10, according to a report from the Energy Information Administration released Wednesday. Analysts and traders expected a fall of 1.4 million barrels, on average, according to a Wall Street Journal survey.
By comparison, data from the American Petroleum Institute on Tuesday showed an increase of 8.6 million barrels, according to sources.
The EIA report also showed that gasoline inventories were down 1.1 million barrels, while distillate stockpiles edged up by 100,000 barrels last week. The WSJ survey had shown expectations for supply declines of 600,000 barrels for gasoline and 500,000 barrels for distillates.
On Nymex, June gasoline RBM9, +0.44% rose 3.6 cents, or 1.8%, to $2.013 a gallon, while June heating oil HOM9, +0.58% added 2.7 cents, or 1.3%, to $2.086 a gallon.
Commenting on the EIA figures, Tariq Zahir, managing member at Tyche Capital Advisors said that “while draws were expected across the whole complex, we saw builds across everywhere.” The surprise climb “should keep a lid on prices,” particularly coupled with the fact that the International Energy Agency cut its crude demand forecast.
In a monthly report Wednesday, the IEA trimmed its forecast for oil-demand growth for 2019 by 90,000 barrels a day to 1.3 million barrels, but said it expected the slower growth to be short-lived.
Still, “geopolitical headlines” remain supportive factors for oil prices, Zahir said.
The U.S. on Wednesday ordered all nonemergency staff to leave Iraq immediately amid heightened tensions with Iran over recent attacks against oil tankers and facilities in the Persian Gulf region.
While the aggressive stance toward Iran “has clearly added an element of strong geopolitical unease to the world’s major oil exporting region, and if it weren’t for strong U.S. supply growth and a sluggish economic/demand performance, even the tentatively price-cautious JBC Energy Research Center would have expected prices to rally much more and set new year-to-date highs,” wrote analysts at JBC Energy, a Vienna-based consulting firm, in a note.
“But let’s not forget, on the thus-far-still-minor-chance of a full escalation in the Middle East, there is not much that would stop prices from reaching the highs of last year and maybe even spike beyond,” they said.
In other energy trading, June natural gas NGM19, +0.38% shed 5.8 cents, or 2.2%, to end at $2.601 per million British thermal units. Analysts polled by S&P Global Platts expect an EIA report on Thursday to show a weekly increase of 101 billion cubic feet in U.S. natural-gas stocks in storage, topping the five-year average increase of 88 billion.