Futures in New York hit a wall Wednesday after a surprisingly big jump in American crude inventories suggested global supplies may be less constrained than previously thought. That ended a two-day run that had pushed prices to their highest since October, after the Trump administration vowed to tighten sanctions on Iran.
Prices in New York slipped 0.6 percent on Wednesday. The U.S. Energy Information Administration said stockpiles swelled by 5.48 million barrels last week, topping even the highest estimates in a Bloomberg survey of oil analysts. American supplies grew for the fourth time in five weeks.
Oil had climbed after Monday’s announcement that the U.S. won’t renew waivers allowing China and other major economies to buy 1.4 million barrels a day from Iran. While it’s dangerous to read too much into one week of EIA data, the report may suggest to some that the impact won’t be so severe, said Brian Kessens, a managing director at Kansas-based money manager Tortoise.
“The market is trying to find its footing and make sense of the heightened geopolitical uncertainty, especially what OPEC is going to do,” he said. “That’s going to be the larger driver of crude oil prices over the next few months than what we see in the weekly numbers.”
Investors were already getting more bearish signals on how the market will react if the waivers expire May 2. Saudi Arabian Energy Minister Khalid Al-Falih said he sees no need for immediate action, while the International Energy Agency said “comfortable” levels of spare capacity remain.
West Texas Intermediate for June delivery declined 41 cents to $65.89 a barrel on the New York Mercantile Exchange. Prices had jumped $2.30 over the previous two sessions to reach the highest close since Oct. 29.
Brent for June settlement added 6 cents to $74.57 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a premium of $8.68 to WTI.
The surge in American stockpiles was driven partly by a rebound in imports. The increase was tempered somewhat by the 10th consecutive drawdown for gasoline supplies and a ramp-up in refinery activity, which could increase demand for oil going forward.
Prices have rallied about 40 percent this year as the Saudis led output cuts by a coalition of producers, including Russia, to avoid a global glut. Unrest in Venezuela, Libya and Nigeria squeezed supplies further.
“The estimated gain in American inventories is pacing down the rally we’ve seen earlier,” said Sungchil Will Yun, a commodities analyst at HI Investment & Futures Corp. in Seoul. “Oil’s expected to stay steady until we see more details on how the Saudis and its allies will bump up their output, going a step further from just signaling a boost.”