Oil prices rose 3 per cent on Wednesday, with Brent crude futures hitting a three-week high, after U.S. government data showed a larger-than-expected draw in crude inventories and as Washington’s sanctions on Iran signaled tightening supplies.
Brent crude futures rose $2.15, or 3 per cent, to settle at $74.78 a barrel. The global benchmark reached $75.00 during the session, the highest since July 31.
U.S. West Texas Intermediate (WTI) crude futures rose $2.02 to settle at $67.86 a barrel, a 3.1 per cent gain.
U.S. crude inventories fell 5.8 million barrels last week, the Energy Information Administration said, exceeding the 1.5 million-barrel draw forecast by analysts polled by Reuters.
Refinery crude runs slipped 89,000 barrels per day from the previous week’s record high to 17.9 million bpd, EIA data showed. Refinery utilization rates remained unchanged last week at 98.1 per cent of total capacity, the highest rates since 1999.
“Strong runs contributed to the big crude draw where about half of the decline was offset by combined gasoline and distillate stock builds,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
U.S. gasoline stocks rose 1.2 million barrels, while distillate inventories increased 1.8 million barrels, EIA data showed.
Oil also found support from a weaker dollar, which has slipped this week in response to U.S. President Donald Trump’s comment that he was “not thrilled” by the Federal Reserve’s interest rate increases.
A weaker dollar makes oil less expensive for buyers using other currencies.
Oil prices also drew support from the prospect of a drop in crude exports from Iran in response to new U.S. sanctions on the No. 3 producer in the Organization of the Petroleum Exporting Countries.
U.S. sanctions are having a strong effect on Iran’s economy and popular opinion, National Security Adviser John Bolton said on Wednesday.
European oil companies have started to cut back on Iranian purchases, although Chinese buyers are shifting their cargoes to Iranian-owned vessels to keep supplies flowing.
“The Iran issue continues to occupy traders’ minds,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Ratcheting up tensions, Iran warned on Wednesday it would hit U.S. and Israeli targets if it were attacked by the United States after Trump’s security adviser said Washington would exert maximum pressure on Tehran going beyond economic sanctions.
OPEC has started to boost supplies following a deal with Russia and other allies in June, although producers have been cautious so far. Saudi Arabia told OPEC it cut supply in July, rather than increasing output as expected.
Signs of tighter supply countered concern about slowing oil demand stemming partly from the trade dispute between the United States and China, the world’s two largest economies.
U.S. and Chinese officials were set to resume talks on Wednesday, but Trump said he expected there will be no real progress.