Substantial fall in oil stocks drives prices up

London — Oil prices nudged higher on Wednesday, supported by a sharp fall in US crude stocks and tensions over Iran.

Brent crude futures were up eight US cents at $63.91 a barrel by 10.18am GMT, while US West Texas Intermediate crude was up 20c at $56.97 a barrel.

US crude stocks fell more than expected in the week to July 19, falling 11-million barrels to 449-million, the American Petroleum Institute said on Tuesday.

That compared with analysts’ expectations for a decrease of four-million barrels.

API data showed petrol stocks rose by 4.4-million barrels.

The US government’s official figures were due on Wednesday morning.

“It is back to fundamentals, at least for today, as geopolitical tensions take a back seat to the release of weekly US oil inventories data,” Harry Tchilinguirian, global oil strategist at BNP Paribas, told the Reuters Global Oil Forum.

Meanwhile, signs of rising tension in the Middle East offset a weaker global growth outlook from the International Monetary Fund, which had kept prices largely flat for much of Tuesday’s session.

A US Navy ship took defensive action against a second Iranian drone in the Strait of Hormuz last week, but did not see the drone go into the water, the US military said on Tuesday.

Iranian President Hassan Rouhani said on Wednesday his country was ready for “just” negotiations, but not if they meant surrender, without saying what talks he had in mind.

Also fuelling tension, Britain gained initial support from France, Italy and Denmark for its plan for a European-led naval mission to ensure safe shipping through the Strait of Hormuz, following Iran’s capture of a British-flagged tanker.

“Britain’s request, rather than Washington’s, makes it easier for Europeans to rally round this,” one senior EU diplomat said. “Freedom of navigation is essential, this is separate from the US campaign of maximum pressure on Iran.”

The potential for renewed China-US trade talks also helped bolster prices, analysts said.

On Tuesday, White House economic adviser Larry Kudlow called it a good sign that top US officials would be travelling to China to discuss reviving stalled trade talks.

“The possible nearing of a trade deal provided a strong bid for risky assets, lifting oil to its third consecutive gain,” Edward Moya, senior market analyst at Oanda in New York, said in a note.

Reuters