(Bloomberg) -- Oil posted the biggest gain in two weeks as deadline for a U.S. decision on the Iranian nuclear accord approached and the dollar weakened.
Futures in New York closed 1 percent higher on Wednesday. President Donald Trump plans to decide whether to reimpose sanctions on Iran on or before May 12, a verdict that could disrupt crude exports by OPEC’s No. 3 producer. At the same time, the greenback’s decline boosted the appeal of crude as an investment after the Federal Reserve left interest rates unchanged.
“This looks like a reaction to the Fed,” said Phil Streible, senior market strategist at RJO Futures in Chicago. “The dollar started to back off and caused other assets to rise, like metals and energy.”
Crude in both New York and London rallied last month in anticipation of this month’s expected U.S. decision on the Iranian nuclear deal. Meanwhile, OPEC’s April crude exports dropped to the lowest this year, according to data from cargo tracking company Kpler. Saudi Arabia set the price of its benchmark crude for Asian customers at the highest since August 2014, adding to bullish momentum in the market.
Oil prices are reflecting “concern about the Iranian sanctions,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Most of the comments we are likely to hear for the next week or so are going to be very bullish for prices -- lots of grumbling and grandstanding.”
West Texas Intermediate crude for June delivery advanced 68 cents to settle at $67.93 a barrel on the New York Mercantile Exchange. Total volume traded Wednesday was about 19 percent above the 100-day average.
Brent crude for July settlement added 23 cents to end the session at $73.36 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at $5.59 premium to July WTI.
The Bloomberg Dollar Spot Index fell as much as 0.3 percent. A weaker dollar increases the appeal of commodities priced in the currency.
Traders largely discounted an Energy Information Administration report earlier in the session showing U.S. crude inventories rose 6.22 million barrels last week, as almost 80 percent occurred on the West Coast, an area isolated from the rest of the North American market.
“The West Coast in particular is very much of a niche economy,” said Brian Kessens, who helps manage $16 billion in energy assets at Tortoise, in a telephone interview. “There’s just more attention paid to geopolitical concerns, like what’s going to happen with the Iranian sanctions and Venezuela production.”
West Coast crude inventories rose 4.88 million barrels last week, according to the EIA. American crude production rose to a fresh record, and nationwide oil imports climbed and exports declined, all contributing to the storage increase.
Other oil-market news:
- Gasoline futures fell 0.4 percent to settle at $2.0798 a gallon on Wednesday.
- North America’s great oil surge of 2018 amid the highest oil prices in more than three years is threatened by pipeline gridlock from West Texas to Alberta and investors have yet to fully appreciate the implications, according to Energy Aspects Ltd.
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