Oil rises on US inventory drawdown, supply disruption concerns

Oil prices rose on Wednesday after an industry report showed a decline in US crude inventories last week, amid growing market concerns over tight supply due to export disruptions in Kurdistan and Venezuela, as well as Russian supply outages.

Brent crude futures gained 40 cents, or 0.6%, to $68.03 a barrel by 1000 GMT, while US West Texas Intermediate (WTI) crude rose 38 cents, or 0.6%, to $63.79.

Tamas Varga, analyst at PVM Oil Associates, said: “The market had been expecting a supply surplus and global inventory build-up in the final quarter of the year, but attention has recently shifted back to Eastern Europe and the possibility of new sanctions on Russia.”

He added that delays in resuming Kurdish oil exports, along with Chevron’s reduction of Venezuelan shipments due to issues with US permits, had added to short-term bullish momentum.

Both benchmarks had climbed by more than $1 per barrel on Tuesday after a deal to restart exports from Iraq’s Kurdistan region stalled, halting pipeline shipments that were expected to reach 230,000 barrels per day to Turkey. Flows through the line have been suspended since March 2023.

Elsewhere, US President Donald Trump said on Tuesday he believed Ukraine could retake all territories occupied by Russia, a sudden shift in rhetoric favoring Kyiv. Earlier this month, the Trump administration urged EU nations to accelerate efforts to phase out Russian oil and gas.

Russia, meanwhile, is facing shortages of certain fuel types, according to traders and distributors, as refinery operations decline due to Ukrainian drone attacks. Kyiv has stepped up strikes on energy infrastructure in a bid to reduce Moscow’s export revenues.

Iranian Oil Minister Mohsen Paknejad said on Tuesday that “no new burdensome restrictions” would be imposed on the country’s oil sales, stressing that exports to China would continue, even as Tehran and European powers struggle to reach an agreement to prevent the return of UN sanctions this week.

Data from the American Petroleum Institute (API) showed US crude and gasoline inventories fell last week, while distillate stocks increased, according to market sources.

Official US government energy data is due later on Wednesday. However, a Reuters poll of eight analysts ahead of the release suggested that crude and gasoline inventories likely rose in the week ending September 19, while distillate stocks were expected to decline.

On a broader level, the global oil market is bracing for oversupply and weaker demand. The International Energy Agency said in its latest monthly report that global oil supplies will expand at a faster pace this year, with the surplus set to widen further by 2026.