Oil prices rose 4.5 per cent a barrel on Wednesday to their highest level in more than a month after U.S. crude inventories shrank and as major producers cut nearly a third of offshore Gulf of Mexico production ahead of an expected storm.
Brent crude futures settled at $67.01 a barrel, up $2.85, or 4.44 per cent. U.S. West Texas Intermediate (WTI) crude futures settled at $60.43 a barrel, climbing $2.60, or 4.50 per cent.
Both benchmarks hit their highest prices since late-May.
U.S. crude stocks fell 9.5 million barrels in the week to July 5, shrinking more than triple the 3.1 million-barrel draw analysts had expected as refineries ramped up output, the Energy Information Administration (EIA) said.
“The inventory draw was much stronger than expected,” which helped to push oil prices higher, said Carsten Fritsch, oil analyst at Commerzbank. “Imports dropped and refinery utilization reached the highest level since the beginning of the year, contributing to the big draw.”
A storm expected to form along the Gulf of Mexico also helped oil prices.
Major oil firms began evacuating and halting production in the Gulf of Mexico ahead of the storm, which is forecast to become a hurricane by the weekend.
“With the evacuation of several platforms in the Gulf of Mexico in advance of a tropical storm, that will curb production,” said Andrew Lipow, president of Lipow Oil Associates.
Chevron Corp, Royal Dutch Shell, BP, Anadarko Petroleum and BHP Group were in the process of removing staff from 15 offshore platforms. Exxon Mobil said it was monitoring the weather to determine if its facilities might be affected.
The Gulf of Mexico is home to 17 per cent of U.S. crude oil output which stands at around 12 million barrels per day (bpd).
The U.S. and global benchmarks have gained this year as the Organization of the Petroleum Exporting Countries (OPEC) and big producers such as Russia have curbed output to bolster prices.
The alliance, known as OPEC+, agreed last week to extend their supply-cutting deal until March 2020.
Tensions around Iran’s nuclear program and recent incidents involving oil tankers in the Gulf have also supported prices.
“The ongoing geopolitical tensions between the United States and Iran continue to add a still unquantifiable level of support,” said Saxo Bank commodity strategist Ole Hansen.
A top U.S. general said on Tuesday that Washington hopes to enlist allies over the next two weeks or so in a military coalition to safeguard strategic waters off Iran and Yemen, where the United States blames Iran and Iran-aligned fighters for attacks.