NEW YORK—Oil pulled out of a steep two-day slide to gain a penny on Wednesday after a U.S. government report showed a big drawdown in nationwide crude inventories and OPEC-member Iran conducted missile tests in a move that raised tensions with the West.
U.S. crude rose 1 cent to settle at $136.05 a barrel, halting a precipitous fall from last week's record over $145 a barrel. London Brent crude gained 15 cents to $136.58 a barrel.
U.S. crude stocks fell by 5.9 million barrels last week, more than triple analyst forecasts, with the draw largely along the West Coast, according to the U.S. Energy Information Administration.
"It is a very bullish report with a little bearish news hidden in there," said Rob Kurzatkowski, futures analyst at optionsXpress in Chicago.
Crude had rallied more than $2 earlier after Iran said it test-fired missiles, escalating ongoing tensions with the West over Tehran's nuclear program.
Iran, the second-largest oil producer in the Organization of the Petroleum Exporting Countries, says its nuclear program is for power generation, whereas the West fears it is aimed at making bombs.
Amid an escalating war of words with Israel, an aide to Iran's Supreme Leader was quoted on Tuesday as saying that Iran would hit Tel Aviv, U.S. shipping in the Gulf and American interests around the world if attacked.
Oil's gains were limited on Wednesday by ongoing concerns that soaring energy prices are shrinking demand, particularly in the United States.
U.S. demand for oil products fell 1.8 percent over the past four weeks compared with year-ago levels. Gasoline demand, which usually rises during the summer holiday months, fell 2.1 percent, according to government data.
Oil prices have jumped over 40 percent this year on supply struggling to keep pace with rising consumption in emerging countries like China, rising cash flows from investors seeking to hedge against inflation and the weak dollar and growing tensions between Iran and Israel.
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