Oil prices paused their run of gains on Wednesday, after four days of increases, as Venezuela resumed exports, but fears of Iranian supply disruptions loom.
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Oil prices rose 1% on Wednesday for a fifth straight session on fears of Iranian supply disruptions due to a potential U.S. attack on Iran and possible retaliation against U.S. regional interests.
Brent futures gained $1.05, or 1.6%, to close at $66.52 a barrel. U.S. West Texas Intermediate crude rose 87 cents, or 1.42%, to settle at $62.02 a barrel.
Iran warned U.S. allies in the Middle East it would strike U.S. bases on their soil if the United States attacked it. The United States was from key bases in the region as a precaution given heightened regional tensions, a U.S. official said on Wednesday.
“We are in a period of geopolitical instability and potential supply disruption,” said Jorge Montepeque, managing director at Onyx Capital Group. “The protests in Iran are seen as potentially leading to a regime change. That’s a big one, and the possibility of a U.S. attack is looking high.”
U.S. President Donald Trump on Tuesday urged Iranians to keep protesting and said help was on the way, without specifying what that meant.
“Protests in Iran risk tightening global oil balances through near-term supply losses, but mainly through rising geopolitical risk premium,” Citi analysts said in a note.
The analysts noted, however, that the protests had not spread to the main Iranian oil-producing areas, which had limited the effect on actual supply.
Also supporting oil prices, Federal Reserve Bank of Minneapolis President Neel Kashkari said on Wednesday he is optimistic about the economic outlook and expects inflation to wane, but it is unclear by how much.
U.S. crude and gasoline inventories both rose more than expected last week, the Energy Information Administration said on Wednesday, as refining activity and imports jumped.
“Prices did pull back a little on the report but the focus seems to be on increasing tensions with Iran and that seems to be overshadowing the report right now,” said Phil Flynn, senior analyst with the Price Futures Group.
Crude stocks rose by 3.4 million barrels to 422.4 million barrels last week, the EIA said, compared with analysts’ expectations in a Reuters poll for a 1.7 million-barrel draw. Gasoline stocks increased by 9 million barrels in the week to 251 million barrels, compared with analysts’ expectations for a 3.6 million-barrel build.
Also limiting price gains, Organization of the Petroleum Exporting Countries member Venezuela has begun reversing oil production cuts made under a U.S. embargo as crude exports were also resuming, three sources said.
Two supertankers departed Venezuelan waters on Monday with about 1.8 million barrels each of crude in what may be the first shipments of a 50 million-barrel supply deal between Venezuela and the United States to get exports moving again following the U.S. capture of Venezuelan President Nicolas Maduro.
