Oil closed at a high of more than three weeks

Oil closed at its highest price in more than three weeks after a volatile session on Wednesday, as traders weighed reports of developments linked to the European Union’s draft Iran nuclear deal.

The news suggests some progress in the negotiations, which may ultimately lead to an increase in oil on the global market. But that also comes after comments from Saudi Arabia suggesting a cut in production and data from the US that showed a second straight weekly decline in domestic crude inventories and a weekly drop in gasoline demand.

In this climate, the US WTI crude for October delivery gained $1.15, or 1.2%, to $94.89 a barrel. Alongside, Brent for October delivery rose $1, or 1%, to $101.22 a barrel. Both Brent and WTI closed at their highest level since July 29, according to Dow Jones Market Data.

Nasser Kanaani, a spokesman for Iran’s foreign ministry, said on Wednesday that Iran would comment on Washington’s response when an assessment of the US response to the draft nuclear deal was completed, according to a Bloomberg report.

“We don’t know if that response is positive or negative,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.

Iran International reported on Twitter, citing a report by Al-Arabiya, that the US rejected all additional conditions sought by Iran and called on Iran to lift restrictions on international inspections. Europe is in contact with the parties to the Iran nuclear deal to hold a new round of talks, according to a separate tweet.

Around the same time, “we heard comments from Algeria suggesting that oil volatility is too much of an economic concern and that it is ready to act with other OPEC partners to balance the market,” Flynn said.

Oil prices rose in the previous session after Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman raised the prospect of OPEC+ oil production cuts.

In other words, Algeria may be preparing for a production cut, Flynn said.

“The possibility of an OPEC+ production cut hinted at by Saudi Arabia this week was a catalyst for buyers,” an IG Asia analyst said.

Meanwhile, US crude inventories fell by 3.3 million barrels to 421.7 million in the week ended August 19, the US Energy Information Administration (EIA) said.

The decline in inventories was largely in line with S&P Global Commodity Insights’ forecast of 3.2 million barrels, while analysts polled by Reuters had expected a much smaller decline of 933,000 barrels.

It is worth noting, however, that the decline in stocks was largely limited by the new release of oil from the US strategic stockpile during the week, by more than 8 million barrels.

What surprised analysts the most were gasoline inventories that remained essentially unchanged (down just 27,000 barrels), when the Reuters estimate called for a drop of 1.5 million barrels and the S&P for 2.5 million.

Despite last week’s rebound, the new data put total gasoline demand in the four-week average down 7% from the same period last year.

Analysts are concerned about weak fuel demand, saying it portends a marked slowdown in economic activity.

“Although crude inventories have moved sharply lower, the plunge in gasoline demand is dragging the market lower,” notes Andrew Lipow, president of Lipow Oil Associates. “To me, that’s the most remarkable thing about the statistics,” he adds.

Oil has lost a quarter of its value since early June on fears of an economic slowdown.