Forexpros – Crude oil futures gave back some of the previous session’s sharp gains during European morning hours on Wednesday, as investors locked in gains from the previous session’s Iran-fuelled rally which took prices to a five-week high.
Ongoing hopes for further easing measures by global central banks also supported prices.
On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD86.64 a barrel during European morning trade, dropping 1.15%.
It earlier fell by as much as 1.25% to trade at a session low of USD86.57 a barrel. Prices hit USD88.01 a barrel on Tuesday, the highest since May 31.
Trade volumes were expected to remain light on Wednesday, with NYMEX floor trading and U.S. equity markets closed for the Independence Day holiday.
New York-traded crude prices surged by nearly 5% on Tuesday after media outlets in Tehran reported that Iran had successfully tested medium-range missiles capable of hitting Israel in response to threats of military action against the country.
Oil traders have renewed their focus on lingering tensions between Iran and Israel in recent sessions. There are fears that an escalation of hostilities between Israel and Iran could set off a conflict across the region and send oil prices skyrocketing.
Meanwhile, Iran’s National Security and Foreign Policy Committee drafted a bill Monday proposing to block the Strait of Hormuz for oil tankers in response to a European Union oil embargo on imports from Iran, which started on July 1.
The Strait of Hormuz, located between Iran and Oman, is one of the most important oil-shipping channels in the world, handling about 33% of all ocean-borne traded oil, according to the U.S. Energy Information Administration.
U.S. oil prices hit a high of USD110.53 on March 1, at a time when tensions over Iran’s nuclear program were running high.
Prices remained supported by hopes for a fresh stimulus measures by policy makers in the euro zone and the U.S.
Investors were eyeing the outcome of the European Central Bank’s policy meeting on Thursday.
The ECB was widely expected to announce an interest rate cut to 0.75% from the current record low 1.00% to help bolster growth in the region, following a recent string of weak economic data.
Meanwhile, in the U.S., surprisingly weak manufacturing data earlier in the week fuelled speculation that the Federal Reserve may implement a third round of quantitative easing, to shore up growth in the U.S. economy, which has been hit by the ongoing crisis in the euro zone.
Investors were also awaiting Friday’s U.S. nonfarm payrolls report, amid speculation that the Federal Reserve could implement a third round of quantitative easing to shore up the economy, which has been hit by the ongoing crisis in the euro zone.
Oil traders were also looking ahead to the U.S. Energy Information Administration’s closely-watched weekly report on U.S. stockpiles of crude and refined products due out on Thursday, a day later than usual due to the Fourth of July holiday.
The report was expected to show that U.S. crude oil stockpiles fell by 2.2 million barrels last week.
After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories dropped by 3.0 million barrels last week, compared to expectations for a decline of 1.9 million barrels.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery slumped 1.1% to trade at 99.57 a barrel, with the spread between the Brent and crude contracts standing at USD12.93.
London-traded Brent prices rallied to USD101.56 a barrel on Tuesday, the highest since June 11.
Brent prices have been well-supported in recent sessions amid concerns over a disruption to supplies from Norway, the world’s eighth largest oil exporter.
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