Singapore — Oil prices rose on Wednesday following a report of declines in US crude inventories and as looming sanctions against Iran raised the expectation of tightening supply, while top producer Russia warned of a fragile global crude market.
US West Texas Intermediate (WTI) crude futures were at $69.84 a barrel at 4.28am GMT, up 59c, or 0.9%, from their last settlement. WTI futures gained 2.5% in the previous session.
Brent crude futures climbed 28c, or 0.4%, to $79.34 a barrel. Brent has climbed for four consecutive sessions, gaining 2.2% 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.
US crude stocks fell by 8.6-million barrels in the week to September 7 to 395.9-million barrels, the American Petroleum Institute, a private industry group, said on Tuesday.
Official weekly government data will be published by the US Energy Information Administration (EIA) on Wednesday.
Regarding crude oil production, the EIA said on Tuesday that it expected US output to rise by 840,000 barrels a day between 2018 and 2019 to 11.5-million barrels a day, lower than a rise of 1.02-million barrels a day to 11.7-million that was previously forecast.
Outside the US, traders have been focusing on the effect of US 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 the expectation of a tighter market.
Russian energy minister Alexander Novak on Wednesday warned of the effect of US sanctions against Iran.
"This is huge uncertainty on the market — how the countries, which buy almost 2-million barrels a 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 300,000bbl/day mid-term, in addition to the level of October 2016," he said.
That month Russia produced 11.247-million barrels a day, a post-Soviet Union record-high.
Oil markets were also eyeing Hurricane Florence offshore the US amid surging demand for petrol and diesel.
The storm is expected to make landfall on the US East Coast on Friday, and has caused fuel shortages as millions of households and businesses have evacuated.
Front-month petrol futures rose 0.5% on Wednesday, while heating oil futures increased 0.4%.