Crude oil was up by about 3 per cent on Wednesday as Iran suspended cooperation with the International Atomic Energy Agency (IAEA) and the US and Vietnam reached a trade deal, but a surprise rise in US crude supplies limited price gains somewhat.
Brent crude gained $2.00 or 3 per cent to close at $69.11 per barrel and the US West Texas Intermediate (WTI) crude increased by $2.00 or 3.1 per cent to $67.45 a barrel.
Iran enacted a law stipulating that any future inspection of its nuclear sites by the IAEA would need approval by Iran’s Supreme National Security Council.
The country has accused the agency of siding with Western countries and providing a justification for Israel’s air strikes.
This came after the UN agency’s board voted to declare Iran in violation of obligations under the Nuclear Non-Proliferation Treaty.
Although there have been no disruption to oil, traders priced the black gold based on the geopolitical risk premium attached to the oil producer.
Support also came after President Donald Trump and Vietnamese state media said the US and Vietnam had struck a trade agreement that sets 20 per cent tariffs on many of the Southeast Asian country’s exports following last-minute negotiations.
Meanwhile, crude oil inventories in the US increased by 3.8 million barrels during the week ending June 27, according to new data from the U.S. Energy Information Administration (EIA) released on Wednesday.
The American Petroleum Institute (API) on Tuesday had estimated a 680,000-barrel build for the week ending June 27.
The market is keeping watch over planned supply increases by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) as it plans to raise output by 411,000 barrels per day next month when it meets on July 6, a similar amount to the hikes agreed for May, June and July.
Although overall OPEC+ exports are relatively flat to slightly down since March, the group’s largest producer – Saudi Arabia – lifted shipments in June by 450,000 barrels per day from May, its biggest increase in more than a year.
Possible interest rate cuts by the US Federal Reserve in the second half of this year is also on the table. Lower interest rates could spur economic activity, which would in turn boost oil demand.