Oil Holds Nine-Month High as Supply Risks Offset US Stockpiles

(Bloomberg) -- Oil held gains near the highest level in almost nine months as concerns over a possible escalation in hostilities between Russia and Ukraine overshadowed the first gain in US crude stockpiles in four weeks.

West Texas Intermediate futures traded near $84 a barrel after climbing 3% over the previous two sessions. There’s heightened tension between Kyiv and Moscow after a Ukrainian drone attacked a Russian-flagged oil tanker over the weekend in the Black Sea, a key waterway for the nation’s exports.

While US government data showed crude inventories rose by almost 6 million barrels last week, investors instead focused on shrinking gasoline and distillate stockpiles, which each declined the most in three months.

Simmering tension between Russia and Ukraine “added to the tightness concerns from OPEC+,” said Charu Chanana, a market strategist from Saxo Capital Markets Pte, referring to the supply cuts from Saudi Arabia and Russia. “Markets shrugged off a surprise rise in US oil inventories.”

Oil has rallied since late-June as Saudi Arabia and Russia pledged supply curbs, although headwinds still persist including a sluggish economic recovery from China. OPEC will release its monthly market report later Thursday, providing investors with a snapshot of the market.

Closely-watched measures of oil-market health have also strengthened, with the nearest timespreads for WTI and global benchmark Brent leaping into larger backwardation — a structure that indicates scarcer supply.

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