NEW YORK • Oil futures rose yesterday, with Brent reaching US$80 a barrel, after a larger-than-expected drop in US crude inventories and as American sanctions on Iran added to concerns over global oil supply.
Benchmark Brent crude futures rose by 68 US cents to settle at US$79.74 a barrel. The global benchmark earlier reached US$80.13 a barrel, its highest level since May 22.
US West Texas Intermediate crude futures rose by US$1.12 to US$70.37 a barrel, a one-week high.
American crude inventories fell by 5.3 million barrels in the last week, the US Energy Information Administration said on Wednesday. Analysts had expected a fall of 805,000 barrels.
"Today's crude stock draw of 5.3 million barrels fell far short of the (American Petroleum Institute's) decline but was significantly larger than the normal draw of around one million barrels for this particular week," Mr Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Also supporting prices were supply concerns surrounding United States sanctions on Iran.
Since spring, when the Trump administration said that it would reimpose sanctions, traders have been focusing on the potential impact on global oil supply.
The sanctions will target Iran's oil exports from November.
"Iran is increasingly becoming the preoccupation of the crude market. The last couple of weeks have seen the expected squeeze on Iranian crude flows taking shape, with overall outflows down markedly," consultancy JBC Energy said.
Russian Energy Minister Alexander Novak on Wednesday warned of the impact of the US sanctions against Iran.
"This is a huge uncertainty on the market – how countries, which buy almost two million barrels per day (bpd) of Iranian oil, will act. The situation should be closely watched, the right decisions should be taken," he said.
Mr Novak said global oil markets were "fragile" due to geopolitical risks and supply disruptions, but added that his country could raise output if needed.
Meanwhile, the Organisation of the Petroleum Exporting Countries (Opec) has cut its forecast for oil demand growth next year in its monthly report and said rising challenges in some emerging and developing countries could negatively impact global economic growth.
Opec said it expected demand growth of 1.41 million bpd next year, a 20,000-bpd downgrade from its previous forecast.
Oil traders were also watching the progress of category 4 Hurricane Florence, which is expected to make landfall on the US East Coast by today.
Crude output will not be affected by the massive storm, but the evacuation of more than a million residents, as well as businesses, has prompted a near-term spike in fuel demand.