Oil Closes Above $70 First Time in a Month Amid Tighter Supply

(Bloomberg) -- Crude closed above $70 a barrel for the first time in a month as supplies from the U.S. and Iran shrink.

Futures in New York advanced 1.1 percent on Thursday. At the same time as American crude stockpiles declined and production stalled, Iran’s customers are facing difficulties buying its crude even before sanctions are enforced on Nov. 4. The Islamic nation is also threatening to halt Middle East oil exports if it’s not allowed to ship its crude through the Strait of Hormuz.

“At the end of the day, what we are seeing is a tighter U.S. market. We are seeing stagnation on the oil production side,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto. “This along with an economy that’s still running pretty firm in the United States,” as well as sanctions on Iran has kept prices higher, he said.

Sustaining the rally may prove challenging as seasonal fall refinery maintenance is approaching, which typically leads to crude inventory builds as refiners lower their demand for oil. But shortfalls from Iran could help boost U.S. exports.

“If you’re bullish this market, you are effectively betting that exports are going to offset the usual drop-off in oil demand in the fall due to refinery maintenance,” said Bill O’Grady, chief market strategist at Confluence Investment Management LLC in St. Louis. “If that’s the case, these prices might be justified.”

West Texas Intermediate crude for October delivery climbed 74 cents to settle at $70.25 a barrel on the New York Mercantile Exchange, the highest in more than five weeks. Total volume traded was about 35 percent below the 100-day average.

Brent for October settlement added 63 cents to end the session at $77.77 a barrel on the London-based ICE Futures Europe exchange, the highest since early July. The global benchmark crude traded at a $7.52 premium to WTI.

Other oil-market news:

• Gasoline futures added 1.8 percent to settle at $2.1435 a gallon, the highest since the end of July.
• Analysts and traders are bullish on WTI crude futures, according to a Bloomberg survey.
• President Donald Trump wants to move ahead with a plan to impose tariffs on $200 billion in Chinese imports as soon as a public-comment period concludes next week, according to six people familiar with the matter.

©2018 Bloomberg L.P.