Crude oil up about 2% on big US crude storage draw, Middle East tension

Crude oil prices climbed about 2 per cent to a two-week high on Wednesday on a bigger-than-expected U.S. storage draw and as rising tensions in the Middle East threaten to disrupt oil supplies from the region, with Iran calling for an oil embargo on Israel. Brent futures rose $1.46, or 1.6%, to $91.36 a barrel, while U.S. West Texas Intermediate crude rose $1.45, or 1.7%, to $88.11. That put Brent on track for its highest close since Sept. 29 and WTI on track for its highest close since Oct 3. Earlier in the session both benchmarks rose 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 and in line with the 4.4 million barrel drop seen in data from the American Petroleum Institute (API), an industry group.

It was also the fourth crude storage decline in five weeks and compares with a 1.7 million barrel draw during the same week last year and a five-year (2018-2022) average build of 2.5 million barrels for this time of year. The decline included a drop of 0.8 million barrels at the Cushing storage facility in Oklahoma to its lowest level since October 2014, prompting concerns about the quality of oil remaining in the tanks and what happens if the amount of oil falls below minimum operating levels. Cushing is the delivery point for U.S. oil futures on the New York Mercantile Exchange. Markets factored in risk premiums after hundreds of Palestinians were killed in a blast at a Gaza City hospital on Tuesday that Israeli and Palestinian officials blamed on each other.

Jordan then cancelled 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 the hospital blast had been caused by militants. “This turn of diplomatic fortunes again garners fear of conflict spread and therefore the leap in oil,” said John Evans of oil broker PVM. In the Saudi city of Jeddah, Iranian Foreign Minister Hossein Amirabdollahian urged members of the Organisation of Islamic Cooperation to impose an oil embargo on Israel. The Organisation of the Petroleum Exporting Countries (OPEC) is not planning  to take any immediate action on Iran’s call, four sources from the producer group told Reuters. Iran is an OPEC member.