2019.06.2015:20:00UTC+00Oil Futures Settle Sharply Higher As Geopolitical Tensions Escalate

Crude oil prices rose steeply on Thursday following an escalation in geopolitical tensions after Iran shot down a U.S. military drone over the Strait of Hormuz.

The Federal Reserve's dovish policy stance that signaled interest rate cuts and prospects of more central banks coming out with additional stimulus to spur growth have allayed concerns about energy demand.

Recent data that showed a larger than expected decline in U.S. crude inventories last week contributed as well to crude oil's rise.

West Texas Intermediate Crude oil futures for July ended up $2.89, or 5.4%, at $56.65 a barrel on expiration day.

Meanwhile, WTI crude for August futures, advanced by $3.10, or 5.7%, to $57.07 a barrel.

Oil futures logged their biggest single-day gain since December 2018.

The drone was downed by Iran's elite Revolutionary Guard force. Iran's Foreign Minister Javad Zarif has reportedly tweeted that the drone was shot down by the Islamic Revolutionary Guard Corp as it "violated Iranian airspace."

"We've retrieved sections of the US military drone in OUR territorial waters where it was shot down," he tweeted.

U.S. officials said the drone was in international territory at the time.

Data released by the U.S. Energy Information Administration on Wednesday said crude stockpiles in the U.S. declined by about 3.1 million barrels last week, nearly three times more than analysts' forecast for a 1.1 million barrels drop.

Gasoline inventories were down unexpectedly by 1.69 million barrels last week. Markets had expected an increase of nearly 1 million barrels in gasoline inventories.

Meanwhile, distillates stockpiles were down 0.55 million barrels in the week, compared to forecasts for a build of 0.71 million.

The OPEC and its allies are scheduled to meet early next month to discuss whether to extend a deal to cut crude production beyond June. As per the decision taken in late 2018, the coalition have been cutting crude output by 1.2 million barrels per day since the beginning of this year.