Rupak De Chowdhuri | Reuters
Brent crude futures fell 8 cents to $74.43 per barrel around 12:50 p.m. ET (1650 GMT). The international benchmark reached $74.73 a barrel on Tuesday, highest since Nov. 1.
U.S. West Texas Intermediate crude futures were down 48 cents at $65.82 per barrel. The contract hit $66.60 a barrel on Tuesday, highest since Oct. 31.
U.S. crude inventories rose 5.5 million barrels last week, the Energy Information Administration said, far more than analysts’ forecast of an increase of 1.3 million barrels.
U.S. crude stocks jumped last week as imports increased. The nation imported an average 7.1 million barrels per day last week, up more than 1.1 million bpd from the previous week.
“What we’re looking at is a headline number bearish on crude but supported somewhat by the gasoline number,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “Because of the sanctions that are coming down on Iran and the fact that there’s going to be no waivers, it makes this number look more bullish.”
Crude futures and prices for spot delivery rallied after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action. The move raised worries about tighter global oil supplies.
The United States must be prepared for consequences if it tries to stop Iran from selling oil and using the Strait of Hormuz, Iran’s Foreign Minister Mohammad Javad Zarif warned on Wednesday.
China, Iran’s biggest oil customer, has formally complained about the move.
The spot price surge put the Brent forward curve into steep backwardation, in which prices for later delivery are cheaper than for prompt dispatch.
The United States has said it saw Saudi Arabia as a partner to balance oil markets. But some analysts said the market remained fundamentally bullish.
Signaling no immediate action to counteract missing Iranian barrels, Saudi Energy Minister Khalid al-Falih said on Wednesday that his country’s production in May would not vary greatly from previous months.
“Inventories are actually continuing to rise despite what is happening in Venezuela and despite the tightening of sanctions on Iran. I don’t see the need to do anything immediately,” Falih said.
He added that Saudi Arabia aimed to stick to its output quota fixed in a deal by the Organization of the Petroleum Exporting Countries, Russia and others, but that June numbers would be determined depending on customers’ needs.
The International Energy Agency, a watchdog for oil-consuming countries, said on Tuesday markets are “adequately supplied” and that “global spare production capacity remains at comfortable levels.”
— CNBC’s Tom DiChristopher contributed to this report.