US President Donald Trump - facing high retail gasoline prices ahead of midterm elections - is pushing Saudi Arabia to boost output
Crude barely budged on a report that American stockpiles dropped as traders refrain from placing price bets ahead of a US holiday tomorrow.
Futures traded near their closing price after the industry-funded American Petroleum Institute was said to report crude inventories fell 4.51 million barrels last week, while supplies at Cushing, Oklahoma, shrank by 2.6 million barrels.
That would be the seventh straight decline at the key storage hub if Energy Information Administration data confirms it on Thursday. Before settling just 0.3 percent higher, oil surged past $75 for the first time since 2014.
Also limiting the rally, US President Donald Trump - facing high retail gasoline prices ahead of midterm elections - is pushing Saudi Arabia to boost output.
The quick drop after WTI reached $75 might have been due to “a bout of long liquidation in front of the holiday,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. And “there is always risk” Trump will release oil from the US Strategic Petroleum Reserve to cap prices, he said.
Trump’s pressure on the Middle Eastern ally follows two weeks of gains fuelled by a US push to curb Iranian exports, disruptions in places like Libya and declining American inventories. Morgan Stanley raised its Brent crude forecast to $85 a barrel through to the third quarter of 2019, citing a tighter market than previously anticipated.
The Saudi Cabinet “affirmed the kingdom’s readiness to use its spare capacity when needed to deal with any future changes in oil supply and demand rates, in co-ordination with other producing countries,” according to a report by the Saudi Press Agency.
Investors had questions as “to whether Saudi Arabia and Russia could or would really be able to ramp production quickly enough,” said Rob Haworth, who helps oversee $151 billion at US Bank Wealth Management in Seattle.
“The news of their commitment to ramp production quickly enough along with some evidence that Saudi Arabia is ramping production is giving the market some pause.”
West Texas Intermediate crude for August delivery traded at $74.26 a barrel at 4:42 p.m. after settling at $74.14 a barrel on the New York Mercantile Exchange.
A measure of oil market volatility jumped to the highest since mid-February, before ticking lower.
Brent for September settlement advanced 46 cents to end the session at $77.76 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a $6.17 premium to WTI for September.
US crude stockpiles are forecast to have declined 5 million barrels last week, according to a Bloomberg survey ahead of government data to be released on Thursday. Inventories at Cushing, Oklahoma, fell 2 million barrels last week, according to a separate forecast compiled by Bloomberg.
The API data was also said to show gasoline supplies fell 3.07 million barrels, while distillate inventories dropped 438,000 barrels.