Oil prices rose on Wednesday following a report of declines in U.S. crude inventories and as looming sanctions against Iran raised expectations of tightening supply, while top producer Russia warned of a fragile global crude market.
U.S. West Texas Intermediate (WTI) crude futures were at $69.84 per barrel at 0428 GMT, up 59 cents, or 0.9 percent, from their last settlement. WTI futures gained 2.5 percent in the previous session.
Brent crude futures climbed 28 cents, or 0.4 percent, to $79.34 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, investment analyst at Australia’s Rivkin Securities.
U.S. crude stocks fell by 8.6 million barrels in the week to Sept. 7 to 395.9 million barrels, the American Petroleum Institute (API), a private industry group, said on Tuesday.
Official weekly government data will be published by the U.S. Energy Information Administration (EIA) on Wednesday.
Regarding crude oil production, the EIA said on Tuesday it expected U.S. output to rise by 840,000 barrels per day (bpd) between 2018 and 2019 to 11.5 million bpd, lower than a rise of 1.02 million bpd to 11.7 million that was previously forecast.
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.
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.
The storm is expected to make landfall on the U.S. East Coast on Friday, and has caused fuel shortages as millions of households and businesses have evacuated.
Front-month gasoline futures rose 0.5 percent on Wednesday, while heating oil futures increased 0.4 percent.