(Bloomberg) -- Oil pared gains as data showing swelling US crude stockpiles added to evidence that the market is well supplied and able to absorb potential disruptions from the Middle East.
West Texas Intermediate edged higher to trade near $70 a barrel after earlier climbing above $72 a barrel. Crude advanced 2.4% on Tuesday after Iran’s missile attack on Israel, which was preceded by a warning from the US. Israel is now vowing to retaliate for that strike.
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US government figures released Wednesday showed the country’s crude stockpiles rose 3.89 million barrels last week while gasoline demand sank to a six-month low. Meanwhile, OPEC+ made no changes to plans to start reviving oil production toward the end of the year, despite signs of an impending surplus. The group plans monthly increases beginning with a 180,000-barrel-a-day hike in December — two months later than originally scheduled because of fragile market sentiment.
“OPEC+ has 5.8 million barrels of spare capacity, so even if Israel attacks oil infrastructure, there is plenty of oil to plug the gap,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA.
Crude’s advance after the attack reflected traders’ short-term worries regarding the world’s most important commodity, given that the Middle East accounts for about a third of global supplies. Although Israel and Iran have been facing off since the outbreak of the war in Gaza against Tehran-backed Hamas almost a year ago, previous spikes have been short-lived in the absence of interruptions to oil output.
Iran pumped about 3.3 million barrels a day in September, according to a Bloomberg survey.
“While the geopolitical risk premium rose on Tuesday, our tools suggest that this premium remains moderate,” Goldman Sachs Group Inc. analysts including Yulia Zhestkova Grigsby wrote. “As a result, oil prices remain sensitive to supply disruption risks.”
The looming rebound in OPEC+ production, as well as swelling supplies from the Americas and weak demand in China, contributed to crude’s 16% drop last quarter, and are still a main driver for crude prices.
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