Oil prices surge 3% to 7-week high as surprise US stockpile draw adds to supply worries

By Scott DiSavino

NEW YORK (Reuters) -Oil prices climbed about 3% to a seven-week high on Wednesday as a surprise drop in U.S. weekly crude inventories added to a sense in the market of tightening supplies amid export issues in Iraq, Venezuela and Russia.

Brent futures rose $1.68, or 2.5%, to settle at $69.31 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose $1.58, or 2.5%, to settle at $64.99.

That was the highest close for Brent since August 1 and WTI since September 2.

U.S. crude inventories fell by a surprise 607,000 barrels last week, the Energy Information Administration said. [EIA/S] [API/S]

That compares with the 235,000-barrel build analysts forecast in a Reuters poll, but was smaller than the 3.8 million-barrel draw market sources said the American Petroleum Institute trade group cited in its figures on Tuesday.

"The report is somewhat supportive given the draws across the board here," said John Kilduff, partner with Again Capital, referring to the crude, distillate and gasoline inventory draws in the EIA report.

Oil prices also found support from news that Ukraine's military struck two oil pumping stations overnight in Russia's Volgograd region. A state of emergency was declared in the Russian city of Novorossiisk, which is Russia's major seaport on the Black Sea and contains major oil and grain export terminals.

"The focus recently has shifted back to Eastern Europe and the possible introduction of fresh sanctions on Russia," said PVM Oil Associates analyst Tamas Varga. 

Russia is seeing shortages of certain fuel grades as Ukrainian drone attacks reduce refinery runs, according to traders and retailers, after Ukraine stepped up drone attacks on energy infrastructure to reduce Moscow's export revenues.

Russia's finance ministry proposed raising the rate of value-added tax to 22% from 20% in 2026 to fund military spending and help curb a swelling budget deficit, in what would be the fifth year of the war in Ukraine.

Russia was the second-biggest producer of crude in 2024 behind the U.S. and is a member of OPEC+, which includes OPEC and allies.

U.S. President Donald Trump said he believed Ukraine could retake all the territory captured by Russia, marking a sudden rhetorical shift in Ukraine's favour. The Trump administration earlier this month urged European Union countries to phase out Russian oil and gas more quickly. 

DECLINING U.S. ACTIVITY, IRAN SANCTIONS

In the U.S., oil and gas production and activity in the key producing states of Texas, Louisiana and New Mexico declined slightly in the third quarter of 2025, according to the Dallas Fed on Wednesday.

Iran's Oil Minister Mohsen Paknejad said "new burdensome restrictions" on Iran's oil sales would not be added and sales to China would continue, as Tehran and European powers struggle to reach a deal to prevent the return of U.N. sanctions this week.

Iran has no intention to build nuclear weapons, Iranian President Masoud Pezeshkian told the U.N. General Assembly on Wednesday, just days before international sanctions could be reimposed on his country over Tehran's nuclear ambitions.

Iran, which is under sanctions over its uranium enrichment activities, was the third-biggest producer of crude in OPEC in 2024 behind Saudi Arabia and Iraq

Chevron's curbed oil exports from Venezuela due to U.S. permit issues, adding to short-term bullishness in the market.

Crude prices climbed despite news that eight international oil companies operating in Iraqi Kurdistan reached agreements in principle with Iraq's federal and Kurdish regional governments to resume oil exports, an industry umbrella group said.

Iraq was the second-biggest crude producer in the Organization of the Petroleum Exporting Countries in 2024, according to U.S. energy data.

(Reporting by Scott DiSavino in New York, Seher Dareen in London and Jeslyn Lerh in Singapore; additional reporting by Stephanie Kelly in London; Editing by Mark Potter, Marguerita Choy and Nia Williams)