West Texas Intermediate (WTI) crude oil futures rose to a near two-week high on Wednesday, settling at $71.45 per barrel, as escalating geopolitical uncertainty between the United States and Iran compounded a larger-than-expected drawdown in U.S. crude stockpiles reported by the Energy Information Administration (EIA).
The EIA’s weekly petroleum status report showed that U.S. crude inventories fell by 4.2 million barrels for the week ending March 14, compared with analysts’ consensus estimate of a 1.8 million barrel draw. The decline was driven by higher refinery utilization and a pickup in export demand, according to the agency’s data.
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Geopolitical risk premium returns
The price rally accelerated after reports emerged that the U.S. administration is considering stricter enforcement of sanctions on Iranian oil exports, targeting both buyers and intermediaries. Iran responded with warnings of potential disruptions to shipping routes in the Strait of Hormuz, through which roughly 20% of the world’s petroleum transits daily.
“The market is pricing in a meaningful risk premium again,” said John Kilduff, partner at Again Capital in New York. “Any disruption in the Strait of Hormuz would immediately tighten global supply, and traders are not waiting to see if it happens.”
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The White House has not confirmed the specific enforcement measures, but the rhetoric has been sufficient to push Brent crude above $75 a barrel, its highest level since early March.
EIA data reinforces supply tightness
Wednesday’s EIA report also showed that gasoline inventories fell by 2.1 million barrels, while distillate stockpiles declined by 1.3 million barrels. Total domestic crude production held steady at 13.4 million barrels per day, suggesting that the inventory draw was primarily demand-driven rather than supply constrained.
Refinery inputs rose to 16.1 million barrels per day, up 0.5% from the prior week, indicating stronger processing activity ahead of the summer driving season.
The combination of falling inventories and geopolitical uncertainty has shifted the near-term outlook for oil prices. Analysts at Goldman Sachs noted in a research note that “the risk of a near-term spike above $80 per barrel for WTI has increased materially if Iranian supply is materially disrupted.”
Market reaction and outlook
Oil-linked currencies, including the Canadian dollar and Norwegian krone, strengthened against the U.S. dollar on Wednesday as the crude rally supported commodity-exposed economies. Energy sector equities also gained, with the S&P 500 energy index rising 1.2% in afternoon trading.
Traders are now watching for the next round of U.S.-Iran diplomatic signals, as well as the upcoming OPEC+ meeting scheduled for early April. The producer group has maintained its current output cuts through the first quarter, but any decision to adjust quotas could influence the supply-demand balance heading into the second quarter.
“We are in a wait-and-see mode,” said Vandana Hari, founder of Vanda Insights in Singapore. “The market has already repriced the risk, but without a confirmed supply disruption, further gains may be limited until there is more clarity.”
