Oil prices slipped yesterday following President Donald Trump tweet urging the Organisation of the Petroleum Exporting Countries (OPEC) to keep crude prices lower because of the military protection the United Statesprovides for the region.
US crude inventories fell last week for the fifth straight week by 2.1 million barrels, according to the Energy Information Administration's weekly data reported on Wednesday.
The market's expectation was a draw of 2.7 million barrels in crude oil inventories.
The so-called 'OPEC+' coalition meets on Sunday in Algeria to discuss how to allocate that 1 million bpd increase within its quota framework.
Rising U.S. gasoline prices could create a political headache for Trump before November congressional elections by offsetting Republican tax cuts.
High petrol prices can be an issue for voters, and Trump's attacks come just a couple of months ahead of the USA midterms, where analysts say rising prices could hurt Republicans.
For the Saudis, it's a question of balancing Trump's demands against the impact of American sanctions on Iran and the effect of emerging-market turmoil on oil demand growth, according to people familiar with the kingdom's thinking. Since September of 2017, the price of a barrel of Brent crude has climbed from roughly US$50 a barrel to US$78.66 today. On Tuesday, the global oil benchmark rose 1.3 per cent on a media report that Saudi Arabia, the world's largest oil exporter, was comfortable with prices above $80, indicating the producer would not try to increase output to drive prices lower.
The recent surge in U.S. oil production, led by the Permian Basin of West Texas, has allowed the energy industry to quickly recover from a deep slump that killed thousands of jobs and caused dozens of bankruptcies.
"It is hard for the US/Trump to complain, because it is the US' secondary sanctions on Iran that is driving the oil market tightness", analysts at Mizhuo Securities said in a note.
Finally, weekly crude production inched back to 11 million bpd, the record high it has been hovering around this summer. But it is unclear how easily other producers can compensate for any lost supply.
That was mostly due to the higher oil prices. After starting the year around $60 a barrel, United States oil prices raced above $74 this summer.
While buyers have already reduced their purchases of Iranian oil due to the U.S. sanctions, it is not clear yet how other oil producing countries will be able to compensate for the loss of supply.