Oil swings as risk-off mood vies with US stockpile decline

Oil fluctuated as traders weighed a larger-than-anticipated drop in US crude stockpiles against broader risk-off sentiment. 

West Texas Intermediate traded near $83 a barrel, swinging in a narrow range on Wednesday. US oil inventories fell by 6.37 million barrels last week, according to an Energy Information Administration report. The stockpile draw was larger than most analysts anticipated and was the biggest decline since January.

Meanwhile, a flight from risky assets gripped broader markets. The S&P 500 Index swung in directionless trading while a stronger US dollar made commodities priced into the currency more expensive.

Oil prices have pulled back from recent highs above $90 a barrel as geopolitical risks in the Middle East began to ease. Traders also are weighing the outlook for US monetary policy, with data on the Federal Reserve’s preferred inflation gauge due later this week.

The US, meanwhile, approved tougher measures against Iran in response to its attack on Israel earlier this month. While some Asian refiners are bracing for added scrutiny, the move isn’t expected to have a significant market impact.

Timespreads are signaling tighter conditions, with the gap between Brent’s two nearest contracts widening to $1.05 a barrel in backwardation, a bullish pattern in which the nearer contract trades at a premium to the next in sequence. That compares with 69 cents a week ago.