Oil jumps as US stockpiles sink to their lowest level since February 2015


Oil prices jumped Wednesday as data showed a larger-than-expected drop in US crude inventories.

West Texas Intermediate rose 0.54% to $US69.12 per barrel at 10:45 a.m. ET. Brent, the international benchmark, was up 0.53% to $US74.14 a barrel.

Crude inventories in the US fell by 6.15 million barrels in the week ending July 20, the Energy Information Administration said. The drop brings overall US stockpiles to the lowest point since February 2015.

The drawdown was larger than expected. Analysts had expected a 2.6 million barrel drawdown, while the American Petroleum Institute – a group that represents oil and gas producers – had earlier estimated stockpiles fell by 3.2 million barrels.

Also bolstering prices, tensions between the US and Iran have been rapidly escalating over the past week. President Donald Trump threatened Iran with dire “consequences” on Monday after President Hassan Rouhani said a conflict between the two countries would be the “mother of all wars.”

Rouhani said Wednesday that Iran should respond to those tweets “with action,” according the Associated Press. The strongest response, he said, would be “indifference to their plots and choosing to resist and foil their schemes.”

Trump in May withdrew the US from the Iran nuclear deal, bringing his administration to demand all countries stop importing oil from the Islamic Republic by November or face secondary sanctions.

In addition to Iranian barrels, the move has also threatened regional output. Rouhani warned earlier this month he might disrupt oil shipments in neighbouring countries if the US followed through with such moves.

Administration officials have said in recent weeks that sanctions waivers may be offered to select countries in efforts to wean the world off Iranian oil, a tactic was used under the Obama administration to avoid supply shocks.

WTI is up 43% this year.

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