Futures Movers: Oil prices tick higher ahead of U.S. data expected to show a drop in stocks

Oil prices were marginally higher Wednesday, trying for a third gain in four days, ahead of weekly U.S. data that is expected to show a fall in stocks.

The reinstatement this week of the first phase of U.S. sanctions against major producer Iran also continued to underpin prices.

On the New York Mercantile Exchange, West Texas Intermediate futures CLU8, +0.04% for September delivery rose 11 cents, or 0.2%, to $ 69.28 a barrel. Their settlement Tuesday at $ 69.17 marked the highest level for the most-active contract since July 30, according to Dow Jones Market Data.

Brent crude for October LCOV8, -0.04% the global benchmark, was up 3 cents, or less than 0.1%, to $ 74.68 a barrel. Its finish Tuesday at $ 73.75 a barrel on London’s Intercontinental Exchange was the highest close in more than a week.

The U.S. Energy Information Administration is due to publish stocks-and-production data Wednesday, with analysts surveyed by The Wall Street Journal estimating inventories fell by 2.3 million barrels in the week ended Aug. 3. Industry group the American Petroleum Institute said its own data for the week showed a decrease of 6 million barrels in crude inventories.

Meanwhile, the U.S. Energy Information Administration on Tuesday afternoon lowered its 2019 forecast on U.S. crude-oil production to 11.7 million barrels a day, versus 11.8 million barrels a day issued in July. It also now expects 2018 output at 10.7 million barrels per day, fractionally down from 10.79 million barrels projected last month.

With global supplies in focus, Iran sanctions remain a key factor in the trading background. President Donald Trump on Monday signed an executive order restoring sanctions that will bar the sale of the dollar to the Islamic Republic’s government and outlaw the purchase of its sovereign debt, among other measures, including those that could eventually touch its oil market. Partial sanctions came into effect early Tuesday, with more severe sanctions set for the next 90 days.

Energy market participants estimate that the sanctions, in full force, could block more than 1 million barrels a day of Iran’s roughly 2.5 million barrels a day of crude exports.

But analysts also said the impact on the market could be muted, in large part as other producers could fill the gap. The Organization of the Petroleum Exporting Countries and producers outside the cartel, including Russia, agreed in late June to begin ramping up output after more than a year of cutting production.

“We view that it is very unlikely that the U.S. administration will be successful in reducing Iranian exports to zero. Our expectation is for this more aggressive U.S. threat of sanctions to force around 800,000 to 1 million barrels a day of Iranian crude off the market by November,” said Ehsan Khoman, head of research for the MENA region at MUFG bank.

Iran is currently exporting around 2.2 million barrels a day.

Analysts pointed to multiple supply risks beyond Iran that were helping support Brent prices near a more than three-year high of $ 80.50 a barrel hit in May.

“We know the situation in Libya is unstable…and also in places like Nigeria, but really the big wild card is Venezuela,” said Harry Tchilinguirian, senior oil strategist at BNP Paribas. An economic crisis in Venezuela has caused a sharp drop in oil production and exports, with analysts predicting a continued decline.

Global markets were also monitoring the escalating trade tensions between the U.S. and China as state-owned Chinese companies looked to replace U.S. crude with alternatives ahead of expected tariffs. China was the third-largest importer of U.S. crude in the first quarter of the year, according to EIA data.

“China’s commodity import volumes revived in July, but from a low base a month earlier. Indeed, we think import volumes will fall back in the coming months in line with the slowdown in economic activity,” said Caroline Bain, chief commodities economist with Capital Economics. “Although oil imports rose, they remained fairly low in July as the small refineries struggle with high crude prices and an increased tax burden.”

Among refined products trading, September gasoline RBU8, -0.50% fell less than 0.1% to $ 2.0952 a gallon, while September heating oil HOU8, +0.09% gained 0.1% to $ 2.1717 a gallon.

September natural gas NGU18, +0.03% traded little changed at $ 2.897 per million British thermal units, holding at around its highest level since early July for a most-active contract and trying for four straight gains.

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