NEW YORK/LONDON: Oil prices surged over 6 percent on Wednesday to settle at their highest in weeks, as deadlocked US-Iran negotiations made investors more concerned about prolonged disruptions to Middle Eastern supply.
US government data showed a bigger weekly draw in crude and fuel inventories than expected, which also put upward pressure on oil prices.
Brent crude futures for June rose for the eighth consecutive session and settled up USD6.77, or 6.1 percent, at USD118.03 a barrel, the highest since March 31. The global benchmark climbed further in post-settlement trade to hit $120 a barrel for the first time since June 2022.
US West Texas Intermediate futures for June rose USD6.95, or 7 percent, to USD106.88 a barrel, the highest since April 7.
READ MORE: Oil prices jump to the highest in weeks as global supply worries mount
A White House official said that President Donald Trump had asked US oil companies about ways to mitigate the impact of a potentially months-long US blockade of Iranian ports, adding to concerns that disruptions to Middle Eastern oil supply could be prolonged.
Over USD50 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,” Haitong Futures analyst Yang An said.
Peak demand season adds to supply concerns
Signs of tightening supply have started to show in the US Energy Information Administration data showed US crude stocks fell over 6 million barrels last week, versus analysts’ estimate of just over 200,000 barrels.
US stockpiles of gasoline and distillate fuels, made up primarily of diesel, also fell more than expected last week, raising concerns of potential shortages in the top fuel-consuming nation just as peak summer driving season gets underway.
“Prices will likely find renewed support as summer approaches and incremental product demand converges with supply constraints,” RBC Capital Markets analysts wrote on Wednesday.
Elsewhere, Abu Dhabi National Oil Company has notified some customers 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.
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