Crude oil price Wednesday hit a two-week high above $74 per barrel as an industry report showing a sharp drop in United States crude inventories and the country’s sanctions on Iran pointed to tighter supplies.
While the global benchmark, Brent crude, rose $1.38 to $74.19, the highest since August 8, the United States crude gained $1.28 to $67.12 per barrel.
According to Reuters, the American Petroleum Institute reported US crude stocks fell last week by 5.2 million barrels, more than three times the decline analysts expected.
Oil also found support from a weak dollar, which has slipped this week in response to US 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.
The prospect of a drop in oil exports from Iran, the third-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), in response to new US sanctions was also supporting the market.
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.
Iran has warned that it would hit US and Israeli targets if it were attacked by the US 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.
US and Chinese officials were set to resume talks Wednesday, but Trump said he expected there would be no real progress
Meanwhile, the US crude stocks fell last week, while refined petrol and distillate inventories rose, the Energy Information Administration (EIA) confirmed Wednesday.
Crude inventories fell by 5.8 million barrels in the last week, compared with analysts’ expectations for an decrease of 1.5 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 772,000 barrels, EIA said.
Refinery crude runs fell by 89,000 barrels per day, EIA data showed. Refinery utilisation rates remained unchanged.
Gasoline stocks rose by 1.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 488,000-barrel drop.
Distillate stockpiles, which include diesel and heating oil, rose by 1.8 million barrels, versus expectations for a 1.5 million barrels increase, the EIA data showed.
Net US crude imports fell last week by 1.1 million barrels per day.