Oil Prices Surge to 4-Month High

Oil futures climbed to $80 per barrel today after an unexpectedly sharp drop in U.S. inventories of crude.

The U.S. Energy Information Administration says the country’s stockpile of petroleum shrank by 5.3 million barrels—more than three times what analysts expected—to 396 million barrels. It’s the first time supplies have dipped below 400 million barrels since early 2015.

The swing is being exacerbated by U.S. sanctions on Iranian oil. Other members of the Organization of the Petroleum Exporting Countries have been raising output to offset Iran’s ability to sell its crude. OPEC will discuss production at its meeting next week in Algeria.

EIA reports that U.S. oil production declined from a record 11 million barrels per day to 10.9 million bpd. At the same time, the country’s oil exports rose by 300,000 barrels to 1.8 million bpd. Earlier this week the agency lowered its forecast for average U.S. oil output in 2019 by 200,000 barrels to 11.5 million bpd.

Analysts note that production of distilled products by U.S. refineries climbed well above demand for gasoline over the past few weeks. But approaching tropical storm Isaac could disrupt production in Texas late this week and quickly erase the surplus.