2018.08.2915:40:00UTC+00Oil Prices Climb Higher After Inventory Data

Crude oil prices moved higher on Wednesday, lifted by official inventory data that showed a larger than expected drop in U.S. crude stockpiles last week. Traders were also betting on possible supply shortage due to U.S. sanctions against Iran that begin in November this year.

Data from Energy Information Administration showed that U.S. crude inventories fell by 2.566 million barrels to 405.8 million barrels in the week ended August 24.

The report from EIA also showed imports fell by about 0.657 million barrels per day, while exports rose by 0.624 million barrels per day. Meanwhile, crude production was unchanged at 11 million barrels a day, the report showed.

The EIA report showed gasoline inventories to have fallen by 1.554 million barrels, and supplies of distillate to have dropped by 0.837 million barrels in the week.

According to a report released by the American Petroleum Institute on Tuesday evening, the week ended August 25 saw a surprise oil inventory build of 38,000 barrels to 405.7 million barrels.

Crude oil futures for October delivery ended up $0.98, or 1.4%, at $69.51 a barrel on the New York Mercantile Exchange, the highest settlement so far this month.

On Tuesday, crude oil futures for October ended down $0.34, or 0.5%, at $68.53 a barrel.

It is widely expected that U.S. sanctions against Iran could result in Iranian oil exports falling at a faster-than-expected pace, if dropping imports by some of Iran's key customers are any indication.

The unstable political situation in Venezuela also suggests a possible shortage in crude supply.A report from Bank of America Merril Lunch presents a positive picture with regards to supply. The report says that supply outages from non-OPEC countries are expected to be resolved soon with Canada's Syncrude facility bringing production back online.

It further states that the new agreement between Sudan and South Sudan on a peace deal as well as production increases expected in Canada, Brazil and the U.S. will add new supply in the second half of 2018.