Oil prices climbed Wednesday to score their highest finish of the month, after the U.S. Energy Information Administration (EIA) reported that domestic crude supplies were down 2.57 million barrels for the week ended August 24.
October West Texas Intermediate crude on the New York Mercantile Exchange, the U.S. oil benchmark, was up 98 cents or 1.4% at $69.51 a barrel. The international benchmark October Brent crude on ICE Futures Europe settled $1.19, or 1.6%, higher at $77.14 a barrel.
Both contracts marked their highest settlement so far this month, according to FactSet data.
Analysts surveyed Monday by S&P Global Platts had forecast a modest draw of 1 million barrels in US crude stocks, while the American Petroleum Institute reported a modest rise of 38,000 barrels for the same week.
"Oil prices rose on the back of an unexpected U.S. inventory draw, the second week in a row of declines, together with gasoline demand reaching a record high," William O'Loughlin, investment analyst at Australia's Rivkin Securities told Reuters.
The report from EIA also showed imports fell by about 0.657 million barrels per day (bpd), while exports rose by 0.624 million barrels per day. Crude production was flat from the previous week's record 11 million bpd.
(Source: Reuters Graphics)
Meanwhile, the supply impact of US sanctions on Iran continue to be the focal point of investor sentiment .
It is widely expected that U.S. sanctions against Iran that begin in November this year could result in Iranian oil exports falling at a faster-than-expected pace.
"The US will probably not grant any exemptions for Iranian imports this time, as it did when sanctions were in place between 2012 and 2016. Supply on the oil market remains tight, in other words, " Commerzbank analysts said in a note Wednesday.
“Falling crude stockpiles in the US signal that demand is strong, while concerns remain over supply disruptions from Iran due to American sanctions,” Jim Jaekyun, a commodities analyst at KB Securities told Bloomberg.
The Organization of the Petroleum Exporting Countries (OPEC), of which Iran is the third biggest producer, will discuss in December whether it can compensate for a sudden drop in Iranian oil supply after U.S sanctions against Tehran start in November,
The head of Iraq's state-oil marketer SOMO, Alaa al-Yasiri on Wednesday said that the Organization of the Petroleum Exporting Countries (OPEC), of which Iran is the third biggest producer, will discuss in December whether it can compensate for a sudden drop in Iranian oil supply.
The unstable political situation in Venezuela also suggests a possible shortage in crude supply.
The International Energy Agency (IEA) warned of a tightening market towards the end of the year, due to a combination of supply concerns, such as Iran and also Venezuela, and strong demand especially in Asia.
According to a forecast announced Monday by research and consultancy group Wood Mackenzie, India is set to overtake China as the biggest source of growth for oil demand by 2024.