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Oil Surges to Seven-Week High on Supply Drop, Geopolitical Worries

March 21, 2018 at 16:42 by Andrew Moran

Oil prices are trading higher midweek as they have climbed to their best levels since the beginning of February. After a new US government report showed a surprise decline and geopolitical risks threatening supplies, investors were bullish on crude.

May West Texas Intermediate (WTI) crude futures soared $1.56, or 2.46%, to $65.10 per barrel at 16:21 GMT on Wednesday on the New York Mercantile Exchange. US crude prices are trading at seven-week highs and have advanced 8.5% year-to-date.

Brent, the international benchmark for oil prices, is also rallying in the middle of the trading week. May Brent crude futures rose $1.75, or 2.60%, to $69.16 a barrel on London’s ICE Futures exchange. Brent prices are also poised to settle at their best levels since early February.

According to the US Energy Information Administration (EIA), domestic crude stockpiles decreased 2.6 million barrels for the week ending March 16, surprising the market because analysts had forecast a 2.6 million increase. US output jumped 26,000 barrels to 10.407 million barrels per day (bpd). Gasoline stockpiles slipped by 1.7 million barrels, while distillate supplies dropped by two million barrels.

The latest US Hughes Baker oil rig count stands at 800, up from 796 last week.

Geopolitical risks threaten global supplies, which are further providing support for rising prices. With President Donald Trump recently warning that he could pull the US out of a 2015 international deal to curtail Iran’s nuclear energy goals, fresh economic sanctions could be imposed on the Middle Eastern powerhouse. Meanwhile, Venezuelan production continues to fall as the nation suffers a humanitarian crisis and a new bout of US sanctions.

Other energy markets are mixed on Wednesday. April natural gas futures dipped $0.015, or 0.56%, to $2.66 per gallon. April gasoline futures soared $0.043, or 2.19%, to $2.008 a gallon. April heating oil futures also edged up $0.052, or 2.67%, to $2.0016.

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