Brent rose above $80 per barrel during the previous session for the first time since May, spurred by expectations that USA sanctions against Iran's oil exports, which will start in November, will tighten global markets. USA light crude CLc1 fell $1.15 to a low of $69.22 a barrel.
The price of West Texas Intermediate, the US benchmark, was up 1.20 percent to $70.45 per barrel early Wednesday afternoon. Brent has climbed for four straight sessions, gaining 2.2 percent the previous day.
"Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories", said William O'Loughlin of Australia's Rivkin Securities.
"This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day (bpd) of Iranian oil, will act".
However, the drop has only seen exports fall to near March 2016 levels, when the USA was not pursuing a sanctions policy against Iran and the Iran nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), was in effect.
Market participants have increased hedging activity ahead of the re-imposition of US sanctions on Iranian oil exports in November, when many expect prices to climb above $80/b, the US Energy Information Administration said Tuesday in a report.
USA crude oil production fell by 100,000 bpd to 10.9 million bpd as the industry faces pipeline capacity constraints.
Last month, in its August STEO, the EIA predicted that ethanol production would average 1.04 million barrels per day in both 2018 and 2019.
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"While Iranian exports have fallen by almost 500,000 barrels per day since May, shipments from Iraq and Saudi Arabia have risen by 200,000 barrels per day and 60,000 barrels per day respectively", the IEA added.
Washington has asked buyers of Iranian oil to cut imports to zero in the run up to early November to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.
Iranian crude exports have fallen significantly before USA sanctions even take effect, the IEA said in a monthly report.
"Iran is increasingly becoming the preoccupation of the crude market", said consultants JBC Energy.
Novak said global oil markets were "fragile" due to geopolitical risk and supply disruptions. Meanwhile, France and South Korea are shunning Iranian Crude Oil, forcing the Islamic Republic to effectively remove some Crude Oil from global markets.
"Iran is increasingly becoming the preoccupation of the crude market".
OPEC said the world will need 32.05 million bpd from its 15 members in 2019, unchanged from last month.
Crude prices were also pushed up by Hurricane Florence offshore the United States amid surging demand for gasoline and diesel.