U.S. oil pulls back below $83 as more crude shipments arrive after delays due to Red Sea disruption

A pumpjack is shown outside Midland-Odessa area in the Permian basin in Texas, U.S., July 17, 2018. Image taken July 17, 2018. Liz Hampton | Reuters

U.S. crude oil hovered below $83 a barrel on Wednesday, pulling back slightly after rallying nearly 2% in the prior session.

Traders' focus has shifted back to supply and demand fundamentals as the threat of war between Israel and Iran has faded.

The market looks somewhat bearish at the moment with global oil inventories rising as crude that was stuck on the water due in part to Red Sea disruptions is now unloading, according to a Goldman Sachs note from Tuesday. This is reducing tightness in the market, according to the bank.

Goldman also sees the geopolitical risk premium factored into prices easing by another $5 to $10 a barrel in the coming months.

Here are Wednesday's closing energy prices:

• West Texas Intermediate June contract: $82.81 a barrel, down 55 cents, or 0.66%. Year to date, U.S. crude oil is up more than 15%.
• Brent June contract: $88.02 a barrel, down 40 cents, or 0.45%. Year to date, the global benchmark is up about 14%.
• RBOB Gasoline May contract: $2.73 a gallon, up 0.33%. Year to date, gasoline futures are up about 30%.
• Natural Gas May contract: $1.65 per thousand cubic feet, down 8.7%. Year to date, natural gas is down about 34%.

U.S. commercial crude stockpiles, which exclude the strategic petroleum reserve, fell by 6.4 million barrels last week, the largest drawdown since mid-January, according to data from the Energy Information Administration.

And President Joe Biden on Wednesday signed a foreign aid package that would expand sanctions against Iranian oil by targeting ports, vessels and refineries that knowingly accept the Islamic Republic's crude exports.

Under the legislation, Biden can waive the sanctions for national security reasons, likely limiting their impact on the oil market.

“We maintain our view that the Biden administration has no intention of strictly enforcing sanctions that could drive up global crude prices (and, as a result, US retail gasoline prices) in an election year,” the geopolitical risk service Rapidan Energy told clients in a note before the legislation passed.

A prolonged rally above $95 a barrel for global benchmark Brent is unlikely at the current moment, said Tamas Varga, analyst at oil broker PVM.

The flow of oil from the Middle East has not been interrupted by conflict, production is growing in the U.S., inflation remains stubborn and OPEC has ample spare capacity to roll back on the market in the event of a supply emergency, Varga said.

“It is fair to conclude that the last two on the list played the most prominent roles in bringing the price of Brent down from $92/bbl less than two weeks ago to below $86/bbl on Monday,” the analyst told clients in a note Wednesday.