Oil holds gain

Oil held a gain as a report showed lower US crude stockpiles, and traders weighed the possible fallout from fresh sanctions on Iran.

Brent was steady above $88 a barrel after climbing 1.6% on Tuesday, while West Texas Intermediate was near $83. The American Petroleum Institute reported nationwide crude inventories fell by 3.2 million barrels last week, according to people familiar with the data. If confirmed by official figures later Wednesday, that would be the first drop in five weeks.

The API also flagged a drawdown in overall gasoline levels, while oil stockpiles at the Cushing, Oklahoma, hub were seen shrinking.

The US Senate, meanwhile, passed tougher measures against Iran in response to its unprecedented attack on Israel earlier this month, with President Joe Biden saying he will sign the legislation into law. While some Asian refiners are bracing for added scrutiny, the move isn’t expected to have a significant market impact.

Crude has climbed this year, lifted by supply cutbacks from OPEC+, as well as geopolitical risks in the Middle East and Russia. Traders are also weighing the outlook for US monetary policy, with slower US business activity growth being interpreted as bullish as it feeds into expectations for lower interest rates. Data on the Federal Reserve’s preferred inflation gauge is due later this week.

“Traders have finally gotten a chance to focus on fundamentals, with the geopolitical risk premium somewhat erased,” said Charu Chanana, an analyst at Saxo Capital Markets Pte in Singapore. “Lower inventories signal demand is holding up.”

Timespreads are signaling tighter conditions, with the gap between Brent’s two nearest contracts widening to $1.04 a barrel in backwardation, a bullish pattern in which the nearer contract trades at a premium to the next in sequence. That’s up from 69 cents a week ago.

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