Oil prices surge 3% to 7-week high as surprise US stockpile draw adds to supply worries

[NEW YORK] Oil prices climbed about 3 per cent to a seven-week high on Wednesday as a surprise drop in US weekly crude inventories added to a sense in the market of tightening supplies amid export issues in Iraq, Venezuela and Russia.

Brent futures rose US$1.68, or 2.5 per cent, to settle at US$69.31 a barrel, while US West Texas Intermediate (WTI) crude futures rose US$1.58, or 2.5 per cent, to settle at US$64.99.

That was the highest close for Brent since Aug 1 and WTI since Sep 2.

US crude inventories fell by a surprise 607,000 barrels last week, the Energy Information Administration said.

That compares with the 235,000-barrel build analysts forecast in a Reuters poll, but was smaller than the 3.8 million-barrel draw market sources said the American Petroleum Institute trade group cited in its figures on Tuesday.

“The report is somewhat supportive given the draws across the board here,” said John Kilduff, partner with Again Capital, referring to the crude, distillate and petrol inventory draws in the EIA report. 

Oil prices also found support from news that Ukraine’s military struck two oil pumping stations overnight in Russia’s Volgograd region. A state of emergency was declared in the Russian city of Novorossiisk, which is Russia’s major seaport on the Black Sea and contains major oil and grain export terminals.

“The focus recently has shifted back to Eastern Europe and the possible introduction of fresh sanctions on Russia,” said PVM Oil Associates analyst Tamas Varga.

Russia is seeing shortages of certain fuel grades as Ukrainian drone attacks reduce refinery runs, according to traders and retailers, after Ukraine stepped up drone attacks on energy infrastructure to reduce Moscow’s export revenues.

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Russia’s finance ministry proposed raising the rate of value-added tax to 22 per cent from 20 per cent in 2026 to fund military spending and help curb a swelling budget deficit, in what would be the fifth year of the war in Ukraine.

Russia was the second-biggest producer of crude in 2024 behind the US and is a member of Opec+, which includes Opec and allies. US President Donald Trump said he believed Ukraine could retake all the territory captured by Russia, marking a sudden rhetorical shift in Ukraine’s favour.

The Trump administration earlier this month urged European Union countries to phase out Russian oil and gas more quickly.

Declining US activity, Iran sanctions

In the US, oil and gas production and activity in the key producing states of Texas, Louisiana and New Mexico declined slightly in the third quarter of 2025, according to the Dallas Fed on Wednesday.

Iran’s oil minister Mohsen Paknejad said “new burdensome restrictions” on Iran’s oil sales would not be added and sales to China would continue, as Tehran and European powers struggle to reach a deal to prevent the return of UN sanctions this week.

Iran has no intention to build nuclear weapons, Iranian President Masoud Pezeshkian told the UN General Assembly on Wednesday, just days before international sanctions could be reimposed on his country over Tehran’s nuclear ambitions.

Iran, which is under sanctions over its uranium enrichment activities, was the third-biggest producer of crude in Opec in 2024 behind Saudi Arabia and Iraq Chevron’s curbed oil exports from Venezuela due to US permit issues, adding to short-term bullishness in the market.

Crude prices climbed despite news that eight international oil companies operating in Iraqi Kurdistan reached agreements in principle with Iraq’s federal and Kurdish regional governments to resume oil exports, an industry umbrella group said.

Iraq was the second-biggest crude producer in the Organization of the Petroleum Exporting Countries in 2024, according to US energy data. REUTERS