By Barani Krishnan
Investing.com – Bets that crude had a sizable draw last week are giving oil prices a lifeline in an otherwise dodgy market.
Both U.S. West Texas Intermediate crude and U.K. Brent oil edged higher in New York trading on Tuesday on expectations that U.S. crude stockpiles fell by 3.6 million barrels for the week ended July 5, adding to the previous week 1.1 million-barrel decline.
WTI crude was up 27 cents, or 0.5%, at $57.93 per barrel by 12:40 PM ET (16:40 GMT).
Brent, the benchmark for oil outside of the U.S., rose by 26 cents, or 0.4%, to $64.37.
“Overall, the market is very quiet, though the roll effect on the front spread in WTI, Brent, and U.S. products has been larger than usual, (amid) talk of a 3-4 million draw in crude and 1-2 mb draw in products,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C..
The American Petroleum Institute will issue a snapshot at 4:30 PM ET (20:30 GMT) on what last week’s drawdown in crude and other products might have been. Official data is due on Wednesday at 10:30 AM ET from the U.S. Energy Information Administration.
Some are bracing for the possibility that the stockpile figures due from the EIA will disappoint. In the previous week to June 28, traders had bet on a crude drawdown of 3 million barrels, but the final number that came in was just about a third of that.
Other oil bulls are counting on price support from an escalation in U.S.-Iran tensions after Tehran’s decision this week to enrich uranium beyond levels it promised world powers in a doomed agreement from four years ago.
Iran threatened on Monday to restart deactivated centrifuges and step up its enrichment of uranium to 20%, a move that further undermines the 2015 nuclear agreement that Washington abandoned last year.
BP (LON:BP), meanwhile, continued to shelter an oil tanker in the Persian Gulf Tuesday for fear of retaliation, according to a Bloomberg report. BP was worried the ship could be attacked by Iran, in response to the seizure by British forces of a tanker allegedly shipping Iranian crude to Syria last week.
U.S. President Donald Trump had warned Tehran over the weekend to “be very careful” about the resumption of enrichment. However, he has otherwise appeared reluctant to use force against Iran, having cancelled a planned strike last month. That has basically made it hard for traders to assess the right geopolitical premium for oil from the Iran crisis.
After a year of saber-rattling that culminated in Tehran’s blowing up of a U.S. surveillance drone in June that almost brought the two countries to war, oil traders still aren’t sure how to price the risk stemming from the sanctions-nuclear political chess played by the Trump and Rouhani administrations. The drone attack aside, Iran has been accused of multiple raids on Saudi and UAE tankers in the Strait of Hormuz, all of which it has denied.
Trade disputes, which threaten to dent global demand for oil, appeared to be held in check on Tuesday. Top negotiators from the U.S. and China are expected to talk via phone this week in preparation for face-to-face meetings in Beijing.
U.S. Federal Reserve Chair Jerome Powell, meanwhile, disappointed traders looking for early clues on whether he would support a rate cut later this month when he completely left out any references to that in a speech he delivered on Tuesday.