The lack of response in U.S. crude oil to a demand earlier this week by President Donald Trump that the Organization of the Petroleum Exporting Countries cut its prices has added to the evidence that a further move higher is possible once the current period of consolidation is over.
On Wednesday, the United States president again accused the OPEC of driving fuel prices higher and urged USA allies such as Saudi Arabia to pump more. He added, "This must be a two way street".
At the time, Trump tweeted that he spoke with Saudi Arabia's King Salman to ramp up oil production to lower prices.
Oil this month rallied to the highest level in more than three years as the Organisation of Petroleum Exporting Countries' output increase plan was overshadowed by supply disruptions in Libya, Canada and Venezuela.
In addition to reducing the price of its August barrels, Saudi Arabia also told the Organization of the Petroleum Exporting Countries (OPEC) that it increased production by nearly 500,000 barrels per day last month.
This comes in the light of increased pressure from the Trump administration on allies to stop funding to Iran. Off-topic, inappropriate or insulting comments will be removed.
Despite these measures, Goldman Sachs said in a July 4 note to clients that "the market will remain in deficit" in the second half of the year. "Their companies - their companies will be subject to the same sanctions that everybody else's are if they engage in those sectors of the economy that are sanctionable, where there were sanctions imposed prior to 2015", the unnamed U.S. State Department Official told the media on June 26.
For starters, Trump's reimposition of sanctions on Iran after canceling President Barack Obama's nuclear deal with that country has put upward pressure on the commodity, according to Mizuho Securities oil analyst Paul Sankey. "Pls stop it, otherwise it will go even higher!"
On Wednesday, an Iranian Revolutionary Guards commander said Tehran might block oil shipments through the Strait of Hormuz. The contract added 20 cents on Tuesday, and there was no settlement Wednesday due to the US holiday.
Brent crude futures were at $77.89 per barrel at 0830 GMT, down 35 cents.
USA crude futures fell $1.20 to settle at $72.94 a barrel, retreating from Tuesday's 3-1/2-year high of over $75.
Gasoline stocks fell 1.5 million barrels, compared with expectations in a Reuters poll for a 817,000-barrel drop. The largest producer in OPEC, the country has never produced more than 10.7 million barrels of oil per day and tapping into the extra million barrels per day could be risky.