Oil Jumps as Supplies Shrink, Trump Seeks Curbs on Iranian Crude

Crude surged past USD 71 for the first time since 2014 as American stockpiles shrank and the U.S. told crude buyers to curb purchases from Iran.

Futures in New York climbed 3% the day after U.S. President Donald Trump’s said he’s withdrawing from the deal that allowed the OPEC producer to boost exports and pledged new sanctions. At the same time, a U.S. government report showed the biggest crude inventory drop since March.

Trump “coming forward and not renewing the deal, and adding sanctions back, obviously is very constructive for crude oil prices,” said Nick Holmes, an analyst at Tortoise in Leawood, Kansas and added “Today’s constructive inventory report out of the U.S. is also supportive”.

Sanctions on Iran will be re-instated after wind-down periods of 90 or 180 days, according to the U.S. Treasury. Goldman Sachs Group Inc. sees an upside risk to its oil price forecast following Trump’s actions on Iran. The bank cited geopolitical risks in Saudi Arabia and Venezuela at a time when inventories are falling.

West Texas Intermediate crude for June delivery advanced to settle USD 71.14 a barrel on the New York Mercantile Exchange, the highest level since November 2014. Total volume traded Wednesday was about 30 percent above the 100-day average. Brent for July settlement climbed to USD 77.21 a barrel on the London-based ICE Futures Europe exchange.

In the U.S., EIA data showed crude stockpiles slid by 2.2 million barrels last week, exceeding a Bloomberg forecast for a 1 million-barrel gain in stockpiles before the report was released. The crude draw was largely due to a decline in imports, which fell by the most since November 2016. At the same time, domestic gasoline and distillate supplies also shrunk.

Traders assessing the impact of the U.S. withdrawing from the Iran deal, combined with issues in Venezuela and a strong U.S. inventory report has led prices to rise, said Craig Bethune, a senior portfolio manager at Manulife Asset Management. “Pretty much everything that could go positive to drive up oil prices has happened over the past few days.”