Oil edges up despite record USA crude output

Brent crude oil futures were at $72.74 per barrel at 1412 GMT, 62 cents below their last close.

Oil's recovery, buoyed by potential supply risks, was capped by rising USA inventories while President Donald Trump neared a decision on whether to reimpose sanctions on Iran. Output dropped to 1.50 million bpd in April, the survey found, a new long-term low. When the news broke, the United States crude stockpiles increased by 3.4 million barrels during the week on March 27.

Still, crude prices were within striking distance of a more than three-year high hit in late April, and analysts said the market is sensitive to any developments on Iranian sanctions. The data was revealed by the American Petroleum Institute.

Meanwhile, as Iran is reportedly selling as much of its oil as it can to clients (to the tune of 2.6 million barrels per day in April, according to the SHANA news agency), Citi warned in a note to investors of the risk that prices could slump because too many traders are betting on renewed sanctions.

US crude inventories rose by 3.4 million barrels to 432.575 million in the week to March 27, according to a report by the American Petroleum Institute on Tuesday.

The US administration under President Donald Trump is widely expected to walk away from the 2015 pact with Iran and European powers to rein in Tehran's capabilities to develop nuclear weapons. This implies that its production is just below the target of 32.5 million barrels per day.

"Thus, higher USA oil production is needed to plug the supply gap", said Carsten Fritsch, analyst at Commerzbank, referring to the lack of extra barrels from other OPEC members to compensate for declines.

Brent sweet crude for new July delivery was up 1 cent at 74.70 dollars. Trading on the bourse was closed on Monday and on Tuesday for Chinese public holidays.

If the API's stockpiles data is reflected in the government announcement, it would be the biggest build since early March. Stockpiles in the nation's oil-storage hub of Cushing, Oklahoma, increased 416,000 bbl, and those on the logistically isolated West Coast led with a 4.88-MMbbl build, the most since 1999.

Iranian Foreign Minister Javad Zarif on Twitter called Netanyahu's claims "a rehash of old allegations". Production at Rosneft, the largest Russian oil company, inched up by 0.1 percent in April over March, while Gazprom Neft-which has an ambitious production growth plan-saw its oil production increase by 0.9 percent month on month.

"If they get a waiver to go ahead with the South Pars project, that would be considered good enough for them and, in the near future, I don't see them coming back to pursue more opportunities", said Mr Falakshahi.

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