(Bloomberg) -- Oil held above $56 a barrel Wednesday after the U.S. announced plans to intensify sanctions on Iran and Russia said it would trim production in September.
Futures in New York ended the day 4.2% higher as Brian Hook, Washington’s special representative to Iran, said the U.S. will add “maximum pressure” to its Iran campaign. Russia’s energy minister Alexander Novak said his country’s monthly oil output would fall in September, according to Interfax. Prices eased slightly after the American Petroleum Institute reported a surprise build in U.S. crude inventories last week.
“Oil prices are recovering from the sell-off the last few days,” with additional help from predictions for another drawdown in U.S. crude inventories and comments on Russia’s production this month, according to Leo Mariani, an analyst at KeyBanc Capital Markets.
Oil advanced alongside U.S. stocks as political tensions appeared to subside in Hong Kong and the U.K. while indicators in China and Europe hinted global economic growth may not be as bad as some expected.
The industry-funded API reported a 401,000-barrel rise in weekly crude stockpiles, countering the draw forecast by analysts in a Bloomberg survey. The group also reported a 238,000-barrel decline at the Cushing, Oklahoma, storage hub and a combined 2.1 million barrel decrease in gasoline and distillate stocks. The government’s Energy Information Administration will issue its data Thursday.
Crude has fallen nearly 20% from a year ago as the trade war escalated and its toll on the global economy became more apparent despite output curbs by the Organization of Petroleum Exporting Countries and its allies.
Yet, demand concerns emanating from the intensifying U.S.-China trade war won’t be abating anytime soon and that will keep weighing on the market.
“Right now, the market isn’t only following fundamentals. It’s very perceptive to the ongoing trade war,” and that’s affecting demand, said Paola Rodriguez-Masiu, an analyst at Rystad Energy. “You can’t discard the possibility that China and the U.S. will continue to raise the levies again,” she added.
WTI for October delivery traded at $56.03 a barrel on the New York Mercantile Exchange at 4:51 p.m. after settling 4.3% higher at $56.26.
The Brent November contract traded at $60.50 a barrel on the ICE Futures Europe Exchange after settling at $60.70. The global benchmark crude traded at a $4.64 premium to WTI for the same month.
In broader markets, U.S. equity-index futures rallied alongside European and Asian stocks on Wednesday as traders cheered a easing in political tensions from Rome and London to Hong Kong. Treasuries and gold retreated, while the dollar slipped.
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