Oil Hits Multi-Week Highs on U.S. Inventories, Falling Iran Exports

Oil prices rose more than 1 percent on Wednesday, with Brent at its highest in seven weeks and U.S. crude touching a three-week peak, supported by a drawdown in U.S. crude and gasoline stocks and reduced Iranian crude shipments as U.S. sanctions deter buyers.

Brent crude jumped $1.19, or 1.6 percent, to settle at $77.14, after touching $77.41, its highest since July 11.

U.S. oil settled 98 cents, or 1.4 percent higher at $69.51 a barrel, after touching $69.75, its highest since Aug. 7.

U.S. crude inventories fell 2.6 million barrels last week, the Energy Information Administration (EIA) said, exceeding the 686,000-barrel draw forecast by analysts polled by Reuters.

"Crude oil got additional support today from the declining inventories across the board," said Andrew Lipow, president of Lipow Oil Associates. Declining Iranian exports and reduced exports from Venezuela due to terminal damage also lent support to the price, he said.

U.S. crude's discount to Brent <WTCLc1-LCOc1> retreated slightly from the more than 10-week high hit Tuesday.

Oil prices were buoyed by indications that Iranian crude exports were falling faster than previously expected, analysts said.

Iran's crude oil and condensate exports in August are set to drop below 70 million barrels for the first time since April 2017, preliminary trade flows data on Thomson Reuters Eikon show.

Many crude buyers have reduced orders from Iran, OPEC's third-biggest producer, ahead of the Nov. 4 start date for U.S. sanctions.

The head of Iraqi state oil producer SOMO said on Wednesday that the sanctions will prompt a crude shortage, and that OPEC will discuss compensating for the supply drop.

In Venezuela, where production has halved since 2016, the state-run oil firm PDVSA said on Tuesday it had signed a $430 million investment agreement to increase production by 640,000 bpd, although some analysts doubted whether this investment would go through given ongoing instability.

Meanwhile, the preliminary export plan for fellow OPEC member Angola indicates that its shipments have dropped to the lowest level since December 2006, as a lack of investment in ageing infrastructure limits production.

Despite the risk of disruption from these OPEC producers, Bank of America Merrill Lynch said global supply could climb toward the end of the year, in part due to increased non-OPEC output from Canada, the United States and Brazil. Norway's Equinor said it plans to develop new oil fields in Brazil and raise output from 90,000 barrels of oil equivalent per day to between 300,000 and 500,000 boepd by 2030.

Reporting by Ayenat Mersie