West Texas Intermediate oil prices topped $70/barrel Wednesday after data released by the US Energy Information Administration showing a decrease in US crude stocks and strong demand for gasoline.  Nabors photo.

Oil prices up as US crude stocks fall to Feb. 2015 levels

Oil prices rose on Wednesday after the US Energy Information Administration released data showing a decline in US crude stocks.  Also, global oil supply concerns grew as the date for re-imposition of sanctions on Iranian crude exports nears.

By 1:44 p.m., EDT, benchmark Brent crude had risen 19 cents to $78.72/barrel and US West Texas Intermediate climbed 86 cents to $70.45/barrel.  The Canadian Crude Index also increased, rising $1.07 to $39.02.

According to the US EIA, crude inventories were down 2.1 million barrels last week to 394.1 million barrels.  This is the lowest since February 2015.  Gasoline stocks also fell, dropping 1.7 million barrels.  Analysts polled prior to the release of the agency’s data had predicted a 100,000 barrel decline.

“It was a squarely bullish report,” John Kilduff, a partner at Again Capital Management told Reuters. “The summer-like demand from drivers is proving unrelenting.”

Gasoline demand remained strong last week, despite the usual decline in consumption in autumn.

On Tuesday, oil prices rose after Saudi Arabia said it was comfortable with prices over $80/barrel and indicated it would not try to boost its output to cut prices.

Earlier this month, the kingdom reportedly said it would like to see oil prices between $70 and $80 in order to maximize revenue while capping oil prices ahead of the US midterm elections.

According to Reuters, the focus on oil supply has been reflected in the options market this week as investors have bought up buy or call options, suggesting they believe prices will continue to rise.

InterContinental Exchange data showed open interest in calls that give the owner the right to buy Brent futures at $80 and $85 by next week increased by almost 45 per cent on Monday and Tuesday.  This is the equivalent of 54 million barrels of oil.

Members of OPEC along with participants in the OPEC supply agreement will meet in Algeria next week to discuss how they will mete out supply increases within the cartel’s quota framework.

The Trump administration’s sanctions on Iranian crude exports will be re-imposed on November 4.  Already a number of customers have cut their purchases of Iranian crude in advance of the sanctions.

At this time, it remains unclear if other producers will be able to make up for lost supply due to the sanctions.