Oil held near its highest close in over six months on Thursday as traders weighed rising risk to Gulf supplies from mounting tension between Iran and the West. Small draws in weekly US product and crude stocks were overshadowed by fears surrounding the world's fourth-largest oil exporter, which has been holding 15 British sailors and marines since on Friday and was hit with new UN sanctions at the weekend.
US light, sweet crude eased 15 cents to $63.93 a barrel, dipping back after closing above $64.00 a barrel for the first time since September 11. London Brent crude shed 3 cents to $65.75 a barrel. Oil markets remained jittery after prices briefly spiked up 8 percent to above $68 late on Tuesday on rumours of a clash between US or British forces and Iran.
London and Washington quickly denied any confrontation, but traders said it was a stark reminder of the risks posed by growing geopolitical angst. Iranian television on Wednesday displayed some of the British sailors and marines held at sea last week, with the only woman crewmember saying they had "trespassed" into Iranian waters.
But Britain said it feared the sailors might have been coerced into appearing and insists they were seized in Iraqi waters. After the broadcast, Iran said it would first release the woman sailor. So far there has been no disruption to Iran's daily shipments of around 2.2 million barrels, or any interruption in the one-fifth of global oil that flows through the Strait of Harms.
On Wednesday's more than $1 gains were kept in check by government data showing a smaller-than-forecast fall in US gasoline inventories last week, which pushed gasoline futures down 0.8 percent. Stocks eased by 300,000 barrels, their seventh decline in a row, but shallower than the expected 1.8 million-barrel draw. Crude stocks dipped by 900,000 barrels, counter to forecasts of a 1.6 million-barrel increase in supplies. "The inventory data was neutral.
The gasoline inventories fell less than expected, which calmed the market ahead of peak season," said Ken Hasegawa of Japanese broker Himarawi CX. April gasoline futures were up 0.1 percent on Thursday at $2.0590 a gallon. Despite prices returning into the danger zone for consumer nations, Opec's secretary-general said there was no need for the cartel to pump additional crude as the gains were due to political tensions, not a shortage of supply.
With geopolitical factors at the fore, oil traders shrugged off economic anxieties that have undermined equity prices. Federal Reserve Chairman Ben Bernanke said that uncertainty about the US economic outlook had increased, a day after housing data painted a bleaker picture of the sector.
A strike by workers at the French Mediterranean oil terminal Fos-Lavera, entering its third week, has begun to hit refinery output and raised concerns over Europe's ability to export fuel to the United States.