Oil gains on U.S. inventory drawdown, Gulf of Mexico storm

U.S. West Texas Intermediate (WTI) crude futures climbed $1.28 to $59.11 by 1136 GMT, after hitting a session high of $59.31.

Brent crude futures were up $1.42 at $65.58, but below a session high of $65.69.

Data from the American Petroleum Institute (API) on Tuesday showed U.S. crude inventories fell by 8.1 million barrels in the week to July 5 to 461.4 million, compared with analyst expectations for a decrease of 3.1 million barrels. [API/S]

Official figures from the government’s Energy Information Administration (EIA) are due later on Wednesday.

Major oil companies began evacuating and shutting in production in the Gulf of Mexico after weather forecasts warned that a tropical disturbance might become a storm on Wednesday or Thursday.

“For all the doom-mongering on the demand front, oil prices are getting a much-needed kick up the backside this morning courtesy of Mother Nature,” said Stephen Brennock, an analyst with PVM.

Chevron Corp (CVX.N), Royal Dutch Shell (RDSa.L), BP (BP.L) and BHP Group (BHP.AX) are removing staff from 15 offshore energy platforms. Exxon Mobil (XOM.N) said it was “closely monitoring” the disturbance to determine if its facilities might be affected.

The Gulf of Mexico is home to 17% of U.S. crude oil output which stands at around 12 million barrels per day (bpd).

The U.S. and global benchmarks have gained this year as the Organization of the Petroleum Exporting Countries (OPEC) and big producers such as Russia have curbed output to bolster prices.

The alliance, known as OPEC+, agreed last week to extend their supply-cutting deal until March 2020. Tensions around Iran’s nuclear program and recent incidents involving oil tankers in the Gulf have also supported prices.

“The ongoing geopolitical tensions between the United States and Iran continue to add a still unquantifiable level of support,” said Saxo Bank commodity strategist Ole Hansen.

The United States will use an emergency meeting of the U.N. nuclear watchdog’s board on Wednesday to raise pressure on Iran. Diplomats expect fiery exchanges between the Iranian and U.S. envoys.

Oil prices have been under pressure from uncertainty over the outlook for global economic growth because of fallout from the U.S.-China trade war as well as record oil supply growth.

The EIA on Tuesday revised its U.S. crude oil production forecast for 2019 to an all-time high of 12.36 million bpd.