June 27 (UPI) -- A big drop in U.S. crude oil inventories and jousting over Iranian exports of oil put the price of oil in another rally phase on Wednesday.
After the market closed on Tuesday, the American Petroleum Institute reported U.S. crude oil inventories declined by 9.2 million barrels last week. That's sharply higher than the forecast by S&P Global Platts of a 2.3 million barrel draw, which it said was supported by higher U.S. crude oil exports.
The drain is concerning in a market situation where supply is relatively close to demand. A deficit is supportive of crude oil prices and the market will be tested later in the day when the U.S. Energy Information Administration releases its figures on crude oil inventories.
The price for Brent crude oil, the global benchmark for the price of oil, was up 1.1 percent as of 9:20 a.m. EDT to $76.97 per barrel. West Texas Intermediate, the U.S. benchmark, was up 1.4 percent to $71.50 per barrel.
Supply-side concerns were amplified Tuesday when a U.S. State Department official said Washington expected Tehran's customers to decrease their imports of Iranian oil to zero by the first week of November. If importers heed U.S. warnings, that would mean about 2 million barrels of oil per day would be gone from the market unless other suppliers move in quick to take up Iran's market share.
"President Trump's zero-policy with Iran is ratcheting up expectations of how many barrels will be taken off the market," Matthew Smith, the director of commodity research at ClipperData, told UPI. "Even though core OPEC are already ramping up production again -- reflected in souped up export loadings this month -- spare capacity fears and ongoing supply concerns from Venezuela to Libya are buoying prices."
Oil is at the center of the latest outbreak of violence in Libya. Political and economic problems for Venezuela, a founding member of the Organization of Petroleum Exporting Countries, prompted member states during the weekend to offer pledges of production increases. The proposed increase, however, could be less than the market needs.
With 2 million barrels per day on the line, a senior official in the Iranian government said it was unlikely imports could be zeroed out by early November.
The price for Brent crude oil is up about 3 percent since Monday.