Oil prices rallied Wednesday, with the U.S. benchmark heading toward its highest since 2014 as domestic crude supplies notched their biggest weekly drop of the year so far.
Traders also showed concerns over U.S. threats to sanction countries that don��t stop importing oil from Iran by Nov. 4.
On the New York Mercantile Exchange, August West Texas Intermediate crude CLQ8, +3.40% �tacked on $2.03, or 2.9%, to $72.56 a barrel. It��s set to top the $72.35 finish from May 21, which was the highest since November 2014. August Brent crude LCOQ8, +2.31% the global benchmark, was up $1.65, or 2.2%, to $77.96 a barrel on ICE Futures Europe, aiming for the highest finish since May.
The U.S. Energy Information Administration reported Wednesday that crude supplies declined by 9.9 million barrels for the week ended June 22��the largest weekly decline so far this year. Analysts surveyed by S&P Global Platts had forecast a fall of 2.3 million barrels, while the American Petroleum Institute on Tuesday reported a drop of 9.2 million barrels.
��Record crude exports and record refinery runs have combined to yield the biggest draw to crude stocks so far this year,�� said Matt Smith, director of commodity research at ClipperData. ��Even crude production holding at a record level has been unable to offset strong domestic and international demand.�� The EIA pegged last week��s total domestic crude output at 10.9 million barrels a day, unchanged from the previous week.
Gasoline stockpiles rose by 1.2 million barrels for the week, while distillate stockpiles were unchanged for the week, according to the EIA. The S&P Global Platts survey forecast supply increases of 160,000 barrels for gasoline, and 500,000 barrels for distillate stocks.
On Nymex Wednesday, July gasoline RBN8, +2.93% �was up 2.8% at $2.133 a gallon and July heating oil RBN8, +2.93% �traded at $2.180 a gallon, up 2.4%.
July natural gas NGN18, +1.63% �rose 1.8% to $2.992 per million British thermal units, ahead of the contract��s expiration at the end of the trading session.
The oil-price gains came after Brent and WTI closed up Tuesday by more than 2% and nearly 4%, respectively, following threats by the U.S. to sanction countries that don��t cut their imports of Iranian crude to ��zero�� by Nov. 4.
Tuesday��s announcement by the U.S. State Department ��may well have been designed to ramp up the pressure on the Iranian regime, but it is also likely to exert further upward pressure on U.S. prices,�� said Michael Hewson, chief market analyst at CMC Markets UK.
Buyers of Iranian crude had expected the U.S. would allow them a bigger window for winding down their purchases.
President Donald Trump last month pulled the U.S. out of a 2015 international agreement to curb Iran��s nuclear program, setting the stage for the reimposition of economic sanctions on the Islamic Republic that were already expected to hinder its oil exports.
Iran currently exports around 2.4 million barrels a day of crude. Analysts had estimated that anywhere between 400,000 to a 1 million barrels could be at risk once sanctions are fully reinstated in six months.
A ��total stop [of Iranian exports] is unlikely to happen but the more aggressive tone [from the U.S.] suggests there may be a much bigger reduction in Iranian flows than the market has so far priced in,�� analysts at consultancy JBC Energy wrote in a note Wednesday.
The comments out of the U.S. on Tuesday came as Saudi Arabia �� the world��s largest exporter of crude �� said it would raise its own production from 10.8 million barrels a day this month to 11 million barrels a day in July. The move was meant to help ��counter the impact�� of sanctions on Iran, according to Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd.
This past weekend, the Organization of the Petroleum Exporting Countries and Russia agreed to begin ramping up production next month by up to 1 million barrels a day, after more than a year of holding back output. The decision comes amid steadily rising oil prices, geopolitical risks to supply �� including in Iran �� and shrinking global inventories.
OPEC and 10 members outside the oil-cartel, including Russia, implemented a pact to cut crude output by around 1.8 million barrels a day, or roughly 2% of global supply, at the beginning of 2017 as part of an effort to rein in a supply glut.
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