NEW YORK - Oil hit a six-week high on Wednesday after a surprise decline in U.S. inventories and as concern persisted over possible disruption to Middle East supply.
Data released by the U.S. Energy Information Administration (EIA) on Wednesday morning showed a surprise 2.6 million barrel draw in crude inventories. Analysts had expected a 2.5 million barrel build.
Brent crude futures were up $1.47, or 2.2 percent, at $68.89 per barrel by 10:50 a.m. EDT (1450 GMT). Brent has risen by 11.5 percent since hitting a two-month low of $61.77 in early February.
U.S. West Texas Intermediate (WTI) crude futures were up $1.89, or 1.9 percent, at $64.74 a barrel.
"A few things happened," said Jim Ritterbusch, president of Ritterbusch and Associates, referring to the data released by the EIA.
"Crude imports dropped by half a million barrels per day, that contributed to the draw. We saw refinery runs increase more than expected by around 400,000 barrels per day so that ate up a lot of crude. And exports were up slightly," he said.
Saudi Arabia's Crown Prince Mohammed bin Salman on Tuesday arrived in Washington, raising speculation the United States could reimpose sanctions on Iran, following renewed criticism of the 2015 nuclear deal.
"So even though you do see signs that the market is lax on the physical side, do you go aggressively bearish when you have the potential for something happening between the U.S. and Iran?"
Analysts also pointed to the nomination of Mike Pompeo as U.S. Secretary of State as a risk to oil markets, given he fiercely opposed the Iranian nuclear deal as a member of Congress.
Energy consultancy FGE said new U.S. sanctions on Iran could result in a drop of 250,000 to 500,000-bpd in its exports by year-end, compared with crude exports of roughly 2.0 million to 2.2 million bpd since early 2016, when sanctions were lifted.
"... Oil sanctions against Iran would have a greater impact in an undersupplied market than in an oversupplied one. The unexpected 2.7-million barrel decline in U.S. crude oil stocks last week, as reported by the API, is likely to confirm market participants in this view. The oil price strength could therefore continue in the coming days," Commerzbank analysts said in a note.
Investors have been particularly wary of the steep rise in U.S. output, which has grown by more than 20 percent since mid-2016, to 10.38 million bpd, putting the United States on track to possibly become the world's largest oil producer this year.