Oil prices rose on Wednesday after a report of falling crude inventories and the looming sanctions against Iran fuelled expectations of a tightening market.
Prices were also pushed up by Hurricane Florence, which is expected to make landfall on the U.S. East Coast on Friday, and which has caused fuel shortages following the evacuation of millions of households and businesses.
U.S. West Texas Intermediate (WTI) crude futures were at $69.81 per barrel up 56 cents, or 0.8 percent, from their last settlement, while Brent crude futures climbed 24 cents, or 0.3 percent, to $79.30 a barrel.
The increases extended a more than 2 percent climb in both crude benchmarks the previous session.
“Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
U.S. crude stocks fell by 8.6 million barrels in the week to September 7 to 395.9 million barrels, the American Petroleum Institute (API), a private industry group, said on Tuesday.
Outside the United States, traders have been focusing on the impact of looming U.S. sanctions against Iran, which will target oil exports from November.
Washington has put pressure on other governments to also cut imports, and many countries and companies are already falling in line and reducing purchases, triggering expectations of a tighter market.
Meanwhile, Russia has attributed fragile oil market to geopolitics as well as output falls
Russia’s energy minister, Alexander Novak, said the global oil market has recovered from an oversupply crisis following the 2016 Vienna accord to curb output but remains “fragile” due to geopolitics and production declines in some nations.
“Today, the situation is quite fragile, of course, and it is related to the fact that not all the countries have managed to restore their market and production,” Novak said at an economic conference in the Russian far eastern city of Vladivostok.
“We observe such situation in Mexico, where the decline more than halved from the forecasts on 2018. In Venezuela production is falling quite strongly, by 50,000 barrels per day. This means that the market is still not balanced in long-term perspective.”
He said geopolitics was also having a big impact.
“Of course, this is huge uncertainty on the market – how the countries, which buy almost 2 million barrels per day of Iranian oil, will act. Those are Europe, Asia Pacific region … There is a lot of uncertainty. The situation should be closely watched, the right decisions should be taken.”
Novak said a September meeting of an OPEC/non-OPEC committee that monitors output compliance, known as the JMMC, will discuss the market situation in Algeria. Algeria is seeking to attract investment in its offshore oil and gas.
He said the meeting would discuss further oil market cooperation taking into account supply and demand forecasts for the third and fourth quarters of 2018 and the first half of 2019.
Novak also said that Russia plans to obtain a 20 percent share of the global liquefied natural gas (LNG) market thanks to abundant gas reserves.
“I am sure we will reach this goal,” he said.