Oil Trades Near Seven-Week High on Iran, Stockpiles

Oil traded near the highest level in seven weeks in New York amid speculation U.S. stockpiles will decline and tension with Iran may escalate.

Futures swung between gains and losses after rising for a fourth day on 16 July. Crude stockpiles probably fell 750,000 barrels last week, a fourth weekly drop that further erodes the biggest glut since 1990. The U.S. will use all elements of American power to prevent Iran from obtaining nuclear weapons, Secretary of State Hillary Clinton told reporters on 16 July in Jerusalem.

Oil for August delivery was at $88.53 a barrel, up 10 cents, in electronic trading on the New York Mercantile Exchange. The contract gained 1.5 percent to $88.43 on 16 July, the highest close since May 29. Prices are 10 percent lower this year.

Brent crude for September settlement was at $103.49 a barrel, up 12 cents, on the London-based ICE Futures Europe exchange. The front-month price for the European benchmark contract was at a premium to West Texas Intermediate of $14.58, compared with $15.12 on 16 July.

U.S. Stockpiles

U.S. refineries probably boosted production to 93.1 percent of capacity last week, a five-year high and an increase of 0.4 percentage point from a week earlier.

Gasoline supplies may have increased 1.1 million barrels, according to the median estimate of six analysts. Inventories of distillates, a category that includes heating oil and diesel, probably rose 1 million barrels.

Iran Tension

Clinton departed Israel for Washington on 17 July after a nine-country, 12-day trip. She met with Israeli leaders on issues including Iran, upheaval in the Arab world, the stalled Israeli-Palestinian peace process and the political transition in Egypt, where she spent a day and a half.

Iran has threatened to close the Strait of Hormuz, a transit route for about a fifth of the global oil shipments, in response to sanctions on its nuclear program. The Persian Gulf nation maintains that the program is for civilian use.