Oil prices jump to the highest in weeks as global supply worries mount

NEW YORK/LONDON:  Oil prices rose more than 5% on Wednesday, with the Brent contract at its highest in a month, as investors grew more concerned about prolonged disruptions to Middle Eastern supply as the U.S. and Iran remained deadlocked in negotiations.

U.S. government data showed a bigger weekly draw in crude inventories than expected, which also put upward pressure on U.S. crude.

Brent crude futures for June rose $6.08, or 5.5%, to $117.34 a barrel by 11 a.m. ET, climbing for an eighth day to the highest level since March 31. The June contract expires on Thursday and the more active July contract was up about 5% at $109.59.

U.S. West Texas Intermediate (WTI) futures for June rose $5.26, or 5.3%, to $105.19 a barrel, the highest since April 13. The contract has risen in seven of the past eight trading sessions.

U.S. President Donald Trump urged Iran to “get smart soon” and sign a deal to end its war with the U.S. and Israel. Trump has also asked U.S. oil companies about ways to mitigate the impact of a potentially months-long U.S. blockade of Iranian ports, stoking concerns that disruptions to Middle Eastern oil supply could be prolonged.

Over $50 billion worth of crude oil supply had been lost since the start of the Iran war, according to Reuters calculations as of mid-April.

“If Trump is prepared to extend the blockade, supply disruptions would worsen further and continue to push oil prices higher,” said Haitong Futures analyst Yang An.

UAE leaves OPEC and OPEC+ in huge blow to global oil producers’ group

Signs of tightening supply have started to show in the U.S. as well. Energy Information Administration data showed that U.S. crude stocks fell over 6 million barrels last week, versus analysts’ estimate of just over 200,000 barrels.

Elsewhere, Abu Dhabi National Oil Company has notified some customers that they could load two crude grades outside of the Gulf next month because the Strait of Hormuz remains closed, according to two people with knowledge of the matter and a notice seen by Reuters.

Investors assess UAE leaving OPEC

Investors were also assessing ramifications of the United Arab Emirates’ surprise decision to quit OPEC, though analysts did not expect any major near-term impact on the market.

“Producers in the region will continue to bring whatever they can to market, and production limits are not, in practice, constraining output currently,” said Investec head of commodities Callum Macpherson.

“Looking further ahead, it is well known that there has been tension over the UAE’s production limits, and the possibility of leaving OPEC+ has been there for some time. In that sense, the move is not surprising, but the timing is notable given the wider backdrop in the region.”