Natural gas is burned off near an oil pump jack just outside of Watford City, North Dakota, U.S. (Photographer: Matthew Staver/Bloomberg)

Crude Jumps as Iran's Supply Gap Overshadows U.S. Supply Gain

(Bloomberg) -- Crude climbed to near a four-year high as Iran’s dwindling presence in global markets overshadowed the steepest gain in U.S. oil stockpiles since March 2017.

Futures rose 1.6 percent in New York on Wednesday, erasing early-morning losses. Crude inventories in the world’s largest economy increased at five times the pace predicted in a Bloomberg survey, fueled in part by rising imports and a dip in foreign demand for American oil. Impending U.S. sanctions are scaring buyers away from Iranian cargoes, heightening concern about a worldwide supply squeeze.

“Those of us that count barrels are anxious to see how much Iranian production actually falls next month and then how much Saudi Arabia and Russia will actually make up from any losses,” said Brian Kessens, who helps manage $16 billion in energy assets at Tortoise.

Crude Jumps as Iran's Supply Gap Overshadows U.S. Supply Gain

Russia and Saudi Arabia are pumping an extra million barrels of crude daily and the Russians could add another 200,000 to 300,000 barrels within a “few months,” Energy Minister Alexander Novak said. Meanwhile, even some of Iran’s most loyal customers are growing skittish about defying the U.S. by purchasing cargoes from the Islamic Republic.

“The market seemed to look through the build near-term. There’s still lots of concern about Iran,” said Craig Bethune, a senior portfolio manager at Manulife Asset Management. But, a few more crude inventory gains of that magnitude and “the market will wake up a little bit.”

See Also: Gasoline is U.S. oil’s weakest link as inventories swell

West Texas Intermediate for November delivery climbed $1.18 to settle at $76.41 a barrel on the New York Mercantile Exchange, the highest since November 2014. Total volume traded was about 6 percent above the 100-day average.

WTI’s 50-day moving average climbed above its 100-day for the first time since September 2017, data show.

Brent for December settlement advanced $1.49 to end the session at $86.29 on the London-based ICE Futures Europe exchange, the highest level since 2014. The global benchmark crude traded at a $10.05 premium to WTI for the same month.

Crude Jumps as Iran's Supply Gap Overshadows U.S. Supply Gain

The Energy Information Administration on Wednesday reported that U.S. crude imports increased while exports slid by the most since late July.

“The build isn’t due to anything like production increasing in the U.S. but is more transient in nature, given that the timing for when ships arrive and when ships leave from the Gulf Coast isn’t always consistent on a week-by-week basis,” Kessens said.

Other oil-market news:

  • Gasoline futures rose 0.5 percent to settle at $2.1378 a gallon.
  • Saudi Aramco will meet oil buyers next week and some buyers have gone above their contracts and requested higher volumes, Saudi Arabia Energy Minister Khalid Al-Falih said in Moscow.
  • Oil prices are probably “a bit too high” already, Russian Energy Minister Alexander Novak said in a Bloomberg television interview.
  • As the shipping industry faces major changes, with tighter rules targeting pollution set to come into effect in 2020, Europe’s largest refiners are also grappling with their futures.

©2018 Bloomberg L.P.