Crude Trades Near Two-Month High on Stockpile Drop

Brent crude traded near a two-month high as shrinking oil inventories pointed to an increasingly tight global market.

Futures in London were up 0.5 percent after surging 2.2 percent on Tuesday. Industry data showed U.S. inventories slid 8.64 million barrels last week. The U.S. government cut its outlook for oil production due to pipeline bottlenecks. Meanwhile, Hurricane Florence threatens to disrupt fuel supplies as it moves toward North Carolina.

Impending U.S. sanctions on Iran have started forcing buyers to shun imports from the Islamic republic before a November deadline. With frequent attacks on Libya’s production and falling output in Venezuela, traders are weighing whether the O rganization of Petroleum Exporting Countries and its allies, as well as the U.S., will be able to make up the shortfall.

“The oil price is being given a boost by the API’s report, which shows that U.S. crude oil stocks fell sharply,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.

West Texas Intermediate for October delivery rose as much as $1.31 to $70.16 a barrel on the New York Mercantile Exchange and traded at $70.05 a barrel as of 1:44 p.m. London time. The contract climbed 2.5 percent, or $1.71, to $69.25 on Tuesday. Total volume traded was about 33 percent above the 100-day average.

Brent for November settlement rose 38 cents to $79.44 on the ICE Futures Europe exchange after a 2.2 percent advance on Tuesday. The global benchmark traded at a $9.63 premium to WTI for the same month.

Some other key oil-market figures, news and events:

If government data on Wednesday confirms the API’s report of a more-than 8-million-barrel draw in American crude stockpiles, that would be the biggest decline since July. A Bloomberg survey of analysts forecasts a 2-million-barrel slide. The Energy Information Administration sees U.S. crude output averaging 10.66 million barrels a day this year, lower than the previous estimate of 10.68 million a day. Next year, production is forecast to average 11.5 million barrels a day, down from a previous estimate of 11.7 million a day. Oil producers are signaling their concern that Permian Basin pipelines won’t be ready on time next year, with a five-fold jump in hedging designed to protect against bottlenecks in America’s biggest shale field. OPEC highlighted a range of risks brewing in the global economy that could hurt oil demand as ministers prepared for a meeting on production policy, marking a shift from last month’s outlook. Florence is expanding on its relentless advance toward North Carolina, with heavy rain potentially imperiling major fuel pipelines including the Colonial Pipeline, the largest mover of oil products from the Gulf Coast to the eastern U.S. The Cboe/Nymex Oil Volatility Index rose 4.2 percent on Tuesday, increasing to the highest level in almost two months. Iran is starting to store oil on its fleet of supertankers again as impending U.S. sanctions force the Persian Gulf country to revive a strategy it deployed under previous curbs. Russia has enough spare capacity to set a new record in oil production if the market is in need of more supplies, according to the nation’s energy minister. Libya’s oil production is said to be stable above 1 million barrels a day despite a deadly Islamic State attack on the offices of the country’s state energy company.