Oil prices rose on Wednesday after a report of a decline in U.S. crude inventories and looming sanctions against Iran raised expectations of tightening supply, while top producer Russia warned of a fragile global market.
U.S. West Texas Intermediate (WTI) crude futures were at $69.93 per barrel at 0646 GMT, up 68 cents, or 1 percent, from their last settlement. WTI futures gained 2.5 percent in the previous session.
Brent crude futures climbed 30 cents, or 0.4 percent, to $79.36 a barrel. Brent has climbed for four straight sessions, gaining 2.2 percent the previous day.
“Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories,” said William O’Loughlin of Australia’s Rivkin Securities.
U.S. crude stocks fell by 8.6 million barrels in the week to Sept. 7 to 395.9 million, the American Petroleum Institute (API) said on Tuesday.
Official data will be published by the U.S. Energy Information Administration (EIA) on Wednesday.
Outside the United States, traders have been focusing on the impact of U.S. sanctions against Iran that 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.
“The looming supply risks in the Middle East, particularly U.S. sanctions on Iran, should outweigh the concerns of oil demand growth slowdown from the emerging market crisis and China-U.S. trade tensions,” ANZ bank said on Wednesday.
Russian energy minister Alexander Novak on Wednesday warned of the impact of U.S. sanctions against Iran.
“This is huge uncertainty on the market – how the countries, which buy almost 2 million barrels per day of Iranian oil will act. The situation should be closely watched, the right decisions should be taken,” he said.
Novak said global oil markets were “fragile” due to geopolitical risk and supply disruptions.
“It is related to the fact that not all the countries have managed to restore their market and production,” he said, referring to outages and falling production in Mexico and Venezuela.
Should markets overheat and prices spike, however, Novak said Russia could boost its output.
“Russia has potential to raise production by 300,000 barrels (per day) mid-term, in addition to the level of October 2016,” he said.
That month Russia produced 11.247 million bpd, a post-Soviet Union record-high.
Oil markets were also eyeing Hurricane Florence offshore the United States amid surging demand for gasoline and diesel, although crude output will not be affected on the storm’s current route.
The storm is expected to make landfall on the U.S. East Coast on Friday.