West Texas Intermediate (WTI) crude oil closed lower on Wednesday but stuck above US$100 as the loss of Persian Gulf supply since the start of the war on Iran cuts into stocks, with the International Energy Agency (IEA) reporting a a record draw down in inventories since the conflict began.
WTI crude oil for June delivery closed down US$1.02 to settle US$101.02 per barrel, while July Brent oil was last seen down US$1.98 to US$105.79.
Oil prices have climbed by more than half since the United States and Israel launched their war on Iran on Feb. 28. Iran responded by closing the Strait of Hormuz, trapping in 20% of daily oil supply produced by Persian Gulf nations.
In its closely watched monthly Oil Market Report, the IEA said the loss of Persian Gulf supply is depleting global inventories at a record pace.
"With Hormuz tanker traffic still restricted, cumulative supply losses from Gulf producers already exceed 1 billion barrels with more than 14 mb/d of oil now shut in, an unprecedented supply shock," the agency said.
The IEA said the supply disruption and high prices will cut into demand, expecting a global demand drop of 420,000 barrels per day this year to 104-million bpd, down 1.3-million bpd from its pre-war forecast.
Inventories fell by 129-million bpd in March and by 117-million bpd in April, though rising output from producers outside of the Gulf is helping to ease the supply shock.
"2026 supply growth expectations from the Americas have been revised up by more than 600 kb/d since the start of the year, to 1.5 mb/d on average. Moreover, Atlantic Basin crude oil exports, now heading primarily to hard-hit East of Suez markets, have increased by 3.5 mb/d since February, with notable gains from the United States, Brazil, Canada, Kazakhstan and Venezuela," the IEA noted.
In its weekly survey, the Energy Information Administration reported U.S. commercial oil inventories fell by 4.3-million barrels last week, while the consensus estimate among analysts polled by Reuters expected a drop of 2.9-million barrels.