Crude Dips Ahead of Supply Data

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and Intercontinental Exchange Brent crude futures were mixed with a downside bias early Wednesday, with West Texas Intermediate and Brent crude edging off Tuesday's six-month highs as markets position in front of weekly supply figures set for release from the Energy Information Administration Wednesday morning, while U.S. sanctions on Iran's oil exports limit losses.

American Petroleum Institute said on Tuesday U.S. crude inventories increased by a larger-than-expected 6.86 million barrels (bbl) in the week ended April 19, well above market expectations of a 500,000-bbl build. Industry data also missed estimates for crude oil products, while reporting a surprise build of 2.16 bbl in gasoline stocks and a smaller-than-expected draw in distillate inventories.

EIA will release official supply figures at 10:30 a.m. ET.

International Energy Agency said on Tuesday that markets are "adequately supplied" and that "global spare production capacity remains at comfortable levels," easing fears U.S. sanctions on Iran's oil exports have overtightened the market.

Markets project nearly 1.2 million barrels per day (bpd) of crude would be removed from the global market as a result of the latest round of U.S. sanctions on the Iranian oil industry.

Trump administration announced on Monday the end of all waivers for purchases of Iranian oil beyond May 2, while investors had largely anticipated a gradual reduction in established exemptions, especially for large Asian importers, including China and India.

"We are going to zero-going across the board," Secretary of State Mike Pompeo said on Tuesday.

Oil futures rallied on Tuesday, with the global benchmark surging 2.9% to above $74, a new fresh six-month high, despite U.S. reassurances that Saudi Arabia and United Emirates would offset lost Iranian barrels. Geopolitical risk was also elevated by additional U.S. sanctions on another key member of OPEC, Venezuela, which target the country's central bank. An escalating civil war in Libya has also lifted the risk premium in oil prices.

Near 9 a.m. ET, Nymex June WTI softened to $66.20 bbl, with ICE June Brent flat at $74.50 bbl. Nymex May ULSD futures were down 0.55 cents at $2.1125 gallon, and the May RBOB contract slumped 2.5 cents to near $2.1070.

Liubov Georges can be reached at liubov.georges@dtn.com

(BE)