NEW YORK – Brent oil futures fell on Wednesday from a near four-month peak hit early after an Iranian rocket attack on U.S. forces in Iraq did not damage oil infrastructure, and on a report showing a surprise build in U.S. stockpiles.
The U.S. Energy Information Administration (EIA) said crude inventories rose by 1.2 million barrels during the week ended Jan. 3. That surprised a market that had expected a 2.6 million barrel decrease, and contradicted preliminary industry data showing a 5.9 million barrel decline. [API/S]
Tweets by U.S. President Donald Trump and Iran’s foreign minister signaled at least temporary calm. Trump was due to make further statements.
Analysts said prices fell sharply after news that the attacks targeted military, rather than oil industry facilities.
Brent futures were down $1.20, or 1.8%, to $67.07 a barrel by 10:51 a.m. EST (1551 GMT). In early trade, the contract hit its highest since mid-September at $71.75.
The global benchmark has been trending higher since hitting an October low of $56.15 per barrel, and the session high was 28% above that level.
U.S. West Texas Intermediate (WTI) crude was down $1.41, or 2.3%, to $61.29 a barrel. The session high of $65.65 was the highest since late April.
“The Iranian missile strike overnight did not have a negative impact on the region’s oil supply, so those that covered early in the morning may have re-instated their short positions, or those who went long started to liquidate,” Tamas Varga of PVM Oil Associates said.
Iran’s missile attack on U.S.-led forces in Iraq came hours after the funeral of Qassem Soleimani, commander of the country’s elite Quds Force who was killed in a U.S. drone stroke on Jan. 3.
Tehran fired more than a dozen ballistic missiles against at least two Iraqi military bases hosting U.S.-led coalition personnel, the U.S. military said. The attacks also roiled stock, currency and gold markets.
“All is well!” Trump said on Twitter. He said an assessment of casualties and damage was underway and he would make a statement on Wednesday morning.
Early indications suggested no U.S. casualties, one source told Reuters; other officials declined to comment. Iranian state television said 80 “American terrorists” had been killed and U.S. helicopters and military equipment damaged.
Iraq, Germany, Denmark and Norway said none of their troops were killed or injured.
“Now the price move will depend on what the red line will be for Trump. After the initial reaction, gains have been taken back,” Olivier Jakob of consultancy Petromatrix said. He added that “the risk on supply cannot be fully discounted.”
Saudi Arabia’s state tanker operator Bahri temporarily suspended transits through the Strait of Hormuz, the Wall Street Journal reported.
The Organization of the Petroleum Exporting Countries will respond to any possible oil shortages if necessary, but it also has “limitations”, the United Arab Emirates energy minister said.
Suhail al-Mazrouei said he sees no immediate risk of supplies through the Strait of Hormuz being blocked.
“Iran took and concluded proportionate measures in self-defense,” Iranian Foreign Minister Jawad Zarif said on Twitter. “We do not seek escalation or war, but will defend ourselves against any aggression.”