Oil adds to gain as Middle East tensions persist, U.S. supply build shrugged off

Oil futures gained Thursday as investors focused on still percolating Middle East tensions, with price firmness seen despite another unexpected climb in U.S. crude supplies.

West Texas Intermediate crude for June delivery CLM9, +1.47% was up 71 cents, or 1.1%, at $62.73 a barrel. Its settlement at $62.02 Wednesday on the New York Mercantile Exchange was the highest finish since May 8.

The global benchmark, July Brent LCON9, +1.50% added 72 cents, or 1%, to $72.47 a barrel on ICE Futures Europe. The settlement Wednesday at $71.77 was the highest finish for a front-month contract since May 1, according to Dow Jones Market Data.

The U.S. on Wednesday ordered all nonemergency staff to leave Iraq immediately amid heightened tensions with Iran over recent attacks against oil tankers and facilities in the Persian Gulf region. The threatening activity, which followed the U.S. removal of waivers for select buyers of Iranian oil, is seen potentially disrupting getting oil out of the region to feed the global market.

Prices were higher even with more signs of a robust U.S. production market. Domestic crude supplies rose by 5.4 million barrels for the week ended May 10, according to a report from the Energy Information Administration released Wednesday. Analysts and traders expected a fall of 1.4 million barrels, on average, according to a Wall Street Journal survey.

“U.S. production has increased dramatically to the point that the one-time net importer is now an exporter of energy products. Shale technology has tipped the scales of global production and threatens to reduce the influence that the OPEC has on the market,” said Alfonso Esparza, senior market analyst at Oanda.

“The decision from OPEC members to fight fire with fire and flood the market to drive shale operations into bankruptcy backfired and forced the group to reach out to non-OPEC members in order to have a significant impact on the market by collectively reducing their output,” Esparza said, adding that the deal between OPEC and other major producers that ends in June could be extended if participants deem the market has not reach price stability. Russia, which took a more significant revenue hit with the production controls, is the bigger wild card, the analyst said.

In a separate monthly report Wednesday, the IEA trimmed its forecast for oil-demand growth for 2019 by 90,000 barrels a day to 1.3 million barrels, but said it expected the slower growth to be short-lived.

On Nymex, June gasoline RBM9, +1.95% rose 3 cents, or 1.6%, to $2.044 a gallon, while June heating oil HOM9, +1.44% added 2 cents, or 1%, to $2.1062 a gallon.

June natural gas NGM19, -0.19% was little changed near $2.599 per million British thermal units.

Analysts polled by S&P Global Platts expect an EIA report on Thursday to show a weekly increase of 101 billion cubic feet in U.S. natural-gas stocks in storage, topping the five-year average increase of 88 billion.

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