NEW YORK - Oil prices strengthened slightly ahead of the settlement Wednesday as the Federal Reserve held interest rates steady and expressed confidence that a recent rise in inflation would be sustained.
The Fed's rate-setting committee also downplayed a recent slowdown in economic and job growth, saying that activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months.
Oil demand is closely tied to broader indicators of economic growth.
Earlier in the session, the market shrugged off a surprise build in U.S. crude inventories because the move was largely concentrated on the U.S. West Coast.
Crude stockpiles posted a surprise build of 6.2 million barrels in the week, according to the U.S. Energy Information Administration. [EIA/S]. Nearly 5 million barrels were concentrated on the West Coast.
"That’s why the market isn’t reacting that much, because sometimes the West Coast numbers are erratic and usually when you get a big build in the West Coast, it’s followed with a big draw the next week," said Phil Flynn, an analyst at Price Futures Group. "The market is putting that in perspective," he said. At the same time, distillate demand was strong, he said, offsetting the downward pressure on crude.
July Brent futures <LCOc1> rose 31 cents to $73.42 a barrel by 2:15 p.m. EDT (1815 GMT), after falling nearly 3 percent on Tuesday to their lowest in two weeks. U.S. West Texas Intermediate crude futures were up 61 cents at $67.86.
Iran, a member of the Organization of the Petroleum Exporting Countries, re-emerged as a major oil exporter in January 2016 when some international sanctions against Tehran were lifted in return for curbs on Iran's nuclear programme.
The United States has questioned Iran's sincerity in implementing the nuclear curbs and President Donald Trump has threatened to reimpose sanctions if adjustments are not made to the agreement.
Iran's oil exports hit 2.6 million barrels per day (bpd) in April, according to the Oil Ministry, a record since the lifting of sanctions. China and India bought more than half of the oil.
"The expectation that the U.S. will leave the sanctions waivers is leading Iran to sell as much as it can," Petromatrix strategist Olivier Jakob said.
Trump will decide by May 12 whether to restore U.S. sanctions on Iran, which would likely reduce its oil exports.
"If Trump abandons the deal, he risks a spike in global oil prices," said Ole Hansen, head of commodity strategy at Saxo Bank, noting that reintroducing U.S. sanctions could remove 300,000-500,000 bpd of Iranian oil from global supplies.
However, the rising value of the dollar since mid-April <.DXY> and soaring U.S. supplies have helped check further oil price gains, traders said.