LONDON—Oil hit a two-week high above $74 a barrel on Wednesday as an industry report showing a sharp drop in U.S. crude inventories and U.S. sanctions on OPEC producer Iran pointed to tighter supplies.
The American Petroleum Institute reported U.S. crude stocks fell last week by 5.2 million barrels, more than three times the decline analysts expected. The government’s official figures are due at 1430 GMT.
“The API inventory data published after the close of trading yesterday are lending buoyancy to prices,” Commerzbank analyst Carsten Fritsch said.
“Thus the official inventory data this afternoon are also likely to show a more marked inventory reduction.”
Brent crude, the international benchmark, rose $1.38 to $74.01 a barrel by 1319 GMT and reached $74.19, the highest since Aug. 8. U.S. crude gained $1.28 to $67.12.
Drops in Oil
The prospect of a drop in oil exports from Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, in response to new U.S. sanctions was also supporting the market.
European oil companies have started to cut back on Iranian purchases, although Chinese buyers are shifting their cargoes to Iranian-owned vessels to keep supplies flowing.
“The Iran issue continues to occupy traders’ minds,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
OPEC has started to boost supplies following a deal with Russia and other allies in June, although producers have been cautious so far. Saudi Arabia told OPEC it cut supply in July, rather than increasing output as expected.
Signs of tighter supply countered concern about slowing oil demand stemming partly from the trade dispute between the United States and China, the world’s two largest economies.
U.S. and Chinese officials were set to resume talks on Wednesday, but president Trump said he expected there will be no real progress.
By Alex Lawler