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Crude oil futures fluctuate as bearish draw offsets supply concerns; ICE Brent down to $78.87/b, NYMEX WTI $69.84/b

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Crude oil futures fluctuate as bearish draw offsets supply concerns; ICE Brent down to $78.87/b, NYMEX WTI $69.84/b

London — Crude oil futures were searching for direction in Europe Wednesday as the market weighed signs of a bearish stock build in the US, against looming supply concerns ahead of the start of Iranian sanctions later this autumn.

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At 1005 GMT, the November ICE Brent crude futures contract was down 15 cents from Tuesday's settle at $78.87/b, after trading flat earlier in the morning, while the NYMEX October light sweet crude contract was down 3 cents at $69.84/b. The US dollar was down 0.21%.

On Wednesday, the oil market was looking ahead to whether weekly US stocks data from the US Energy Information, to be released later in the day, would support the surprise build reported by the American Petroleum Institute on Tuesday. The API said crude inventories in the US rose by 1.2 million barrels in the week to September 14, against an estimate by analysts of a 3-million-barrel draw.

That could provide a clearer signal of market fundamentals, including whether Brent is able to break through the $80/b mark, during a week of volatile and headline-driven trading.

On the bullish side, the market is weighing the threat of looming sanctions against Iran, and whether rising output from other producers will be sufficient to make up for the hit to global oil supply.

"I think the clarification of where that oil is going to come from will be telling for the market," particularly for major buyers of Iranian crude, including South Korea and India, said George Wilkes, an analyst at Sucden in London.

The sanctions are looming even as Venezuelan production falls amid an economic crisis and Libya's output is threatened by frequent outages.

On the bearish side are not only signs of rising US shale output, but the escalating US-China trade war, which could dampen long-term economic growth, and with it, demand for oil.

The market will also be watching for the tone between major producers going into this weekend's OPEC/non-OPEC monitoring committee in Algeria.

On Tuesday, Iranian oil minister Bijan Zanganeh said he would not attend the meeting, sending the country's OPEC governor in his place, a move interpreted as a protest against comments from Saudi Arabia and Russia that they would raise output above their current quotas.

"This illustrates how entrenched positions are at present," Commerzbank analysts said in a morning note. "Iran is accusing Saudi Arabia and Russia of stepping up their production in a bid to seize market shares."

--Katherine Dunn, katherine.dunn@spglobal.com

--Edited by Jonathan Fox, jonathan.fox@spglobal.com