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LONDON (Reuters): Brent crude oil rose on Wednesday as a surprise drawdown in U.S. stocks offset efforts by Saudi Arabia to lower prices by promising to ramp up supply if needed.
Industry data released on Tuesday showed an unexpected 1.4-million-barrel decline in crude stockpiles last week, intensifying worries about tight supply.
Comments from the Saudi oil minister reassuring the market that the world’s top oil exporter was prepared to meet any supply shortfall kept a lid on gains.
Saudi Oil Minister Ali al-Naimi said the kingdom had met all its customers’ requests for oil and stood ready to raise output to full capacity of 12.5 million barrels per day (bpd), if needed.
“The lower stocks are giving support to the market, but the Saudi comments will put a short-term cap on the oil price, and ease fears of supply issues emanating out of Iran,” said Ben Le Brun, market analyst with OptionsXpress in Sydney.
Brent crude gained 34 cents to $124.46 a barrel by 0940 GMT, after falling more than a dollar in the previous session on the Saudi comments.
U.S. crude was up 52 cents at $106.63. The benchmark fell more than 2 percent on Tuesday.
The prospect of a conflict in the Middle East between Iran and the West continues to put a floor under the price, analysts said.
U.S. President Barack Obama issued a video accusing Iran of imposing an “electronic curtain” on its citizens on Tuesday, while Iran’s supreme leader Ayatollah Ali Khamenei said the country will defend itself against an attack.
“That was another round of sabre-rattling from both sides and there is still a fear that something bad will happen in the region, which explains some of why we are still at $124 a barrel,” said Thorbjorn Bak Jensen, oil analyst at Global Risk Management.
The U.S. on Tuesday exempted Japan and 10 EU nations from financial sanctions because they have significantly cut purchases of Iranian crude oil, but left Iran’s top customers China and India exposed to the possibility of such steps.
Oil has gained almost 16 percent this year, pushed up by fears of supply disruption stemming from a possible conflict between Iran and the West.
U.S. crude stockpiles fell 1.4 million barrels in the week to March 16, data from the American Petroleum Institute showed, compared with analysts’ expectations for a 2.4 million barrel build.
The market awaited inventory data from the U.S. Energy Information Administration for confirmation of the drawdown.
China’s crude inventory was also lower last month, with commercial stocks falling 3.77 percent by the end of February from a month earlier, official news agency Xinhua said on Wednesday.
China imported a record 1.39 million barrels per day of crude oil from Saudi Arabia in February, 38.6 percent higher than a year earlier, while slashing Iranian imports by around 40 percent, official data showed on Wednesday.
