Workers at an oil rig in Tatarstan, Russia
Workers at an oil rig in Tatarstan, Russia. Image Credit: Bloomberg

London: Oil traded near a five-week low as concern over supply losses from Iran to Russia were offset by high American stockpiles and fears that if US-China trade talks fail it could dent global demand.

Futures erased earlier gains to fall as much as 0.5 per cent in New York after a 1.4 per cent plunge on Tuesday.

Russian tankers continue to hold Urals crude exported from the country’s Baltic Sea port of Ust-Luga, a sign that contamination issues remain unresolved. Meanwhile, US crude stockpiles climbed by 2.81 million barrels last week, though gasoline inventories fell by a similar amount, the American Petroleum Institute was said to report on Tuesday.

The oil market has been benign in its response to the threat of supply losses from Iran following the end of US sanctions waivers on its exports. Prices were down even after the Islamic Republic’s threat to stop observing restrictions on uranium enrichment if Europe doesn’t abide by commitments on oil and banking.

Oil’s rally went into reverse late last month due to speculation that Saudi Arabia and other members of the Organisation of Petroleum Exporting Countries would fill the gap created by the loss of Iranian barrels. Meanwhile, signals that the global economic outlook is improving had been preventing steeper declines, but that’s now been thrown into doubt by the White House’s plan to raise tariffs on Chinese imports. A delegation from Beijing is still set to visit Washington this week for talks.

“It has been a less than auspicious start to the month for the energy complex,” PVM Oil Associates Ltd. analyst Stephen Brennock wrote in a report. “The API provided additional bearish fodder after reporting another increase in US crude stocks.”

West Texas Intermediate crude for June delivery lost 25 cents, or 0.4 per cent, to $61.15 (Dh224.57) a barrel on the New York Mercantile Exchange at 11.41am in London, having earlier added 1.1 per cent. The contract dropped by 85 cents to $61.40 on Tuesday, the lowest close since March 29.

Brent for July settlement fell 43 cents, or 0.6 per cent, to $69.45 a barrel on the London-based ICE Futures Europe exchange. It closed at $69.88 on Tuesday, the lowest since April 4. The global benchmark crude was at a premium of $8.20 to WTI for the same month.

Since the discovery of organic chlorides in Russian crude last month, only one of 13 tankers which loaded at the Ust-Luga terminal has discharged its cargo. Some of the ships which loaded potentially tainted oil have been anchored and awaiting discharge for up to 10 days, according to ship tracking data compiled by Bloomberg. Others are floating at sea, having apparently halted part way through their journeys.

The API report on US stockpiles comes before Energy Information Administration data due Wednesday. The EIA is expected to report a 1.9 million barrel expansion in nationwide crude inventories in the week through May 3, according to the median estimate in a Bloomberg survey.

European and Asian stocks fell for a third day on Wednesday amid speculation the world’s two largest economies will be unable to resolve their differences on trade. Chinese Vice Premier Liu He will lead a trade delegation visiting Washington on Thursday and Friday.