Oil prices climbed about 2% to a two-week high on Wednesday on a bigger-than-expected U.S. storage draw and concerns about global supplies after Iran called for an oil embargo on Israel over the conflict in Gaza.
Brent futures rose $1.60, or 1.8%, to settle at $91.50 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.66, or 1.9%, to settle at $88.32. At their session highs, both benchmarks were up more than $3 a barrel.
The U.S. Energy Information Administration (EIA) said energy firms pulled 4.5 million barrels of crude from stockpiles during the week ended Oct. 13.
That was much higher than the 0.3 million barrel draw analysts forecast in a Reuters poll. On Tuesday, the American Petroleum Institute (API) industry group reported a 4.4 million barrel drop.
It was the fourth crude storage decline in five weeks. It far exceeded the 1.7 million barrel weekly draw a year earlier and compares with a five-year (2018-2022) average build of 2.5 million barrels.
Supplies declined 0.8 million barrels at the Cushing storage facility in Oklahoma to the lowest since October 2014, prompting concerns about the quality of oil remaining at the delivery point for U.S. oil futures.
"The biggest concern in this report is Cushing, Oklahoma ... we're drawing that down to dangerously low levels that should be supportive for the entire complex," said Phil Flynn, an analyst at Price Futures Group.
Middle East tensions
Flynn noted that prices surged to session highs after Iranian Foreign Minister Hossein Amirabdollahian urged an oil embargo on Israel after hundreds of Palestinians were killed in a blast at a Gaza City hospital. Israeli and Palestinian officials blamed each other.
The Organization of the Petroleum Exporting Countries (OPEC) is not planning to take any immediate action on OPEC member Iran's call, four sources from the producer group told Reuters.
Jordan canceled a summit it was to host with U.S. President Joe Biden and Egyptian and Palestinian leaders. Biden arrived in Israel on Wednesday pledging solidarity with Israel in its war against Hamas, and backing Israel's account that militants caused the hospital blast.
"This turn of diplomatic fortunes again garners fear of conflict spread and therefore the leap in oil," said John Evans of oil broker PVM.
Oil prices also drew support by official data showing faster-than-expected economic growth in China, the world's biggest oil importer, in the third quarter.
In the U.S., the world's biggest oil consumer, higher-than-expected September retail sales spurred expectations of another interest rate hike by year-end. Interest rate hikes to curb inflation can slow economic growth and reduce oil demand.
"The latest round of U.S. and Chinese data suggest the world's two largest economies are supportive for steady or rising crude demand," Edward Moya, senior market analyst at data and analytics firm OANDA, said in a note.