Iran has started to store oil in its own tankers off its coasts ahead of the USA sanctions on its oil exports that are expected to cut Tehran's ability to ship and sell oil to customers around the world.
Prices extended gains in post-settlement trade after industry data from the American Petroleum Institute showed US crude inventories slumped 8.6 million barrels last week, versus analysts' forecasts of a 805,000-barrel decrease.
Helping to fuel that slide in inventories was a jump in US oil exports, which rose by more than 300,000 barrels a day to 1.8 million.
The Persian country will by November 4 see a slew of countries already abandoning oil supply contracts and the rest scrambling for alternatives as crushing U.S. sanctions on Iran threaten to impose additional sanctions on those defying the ban on crude imports from the country.
USA ally South Korea did not import any Iranian oil in August, compared to 194,000 bpd imports from Iran in July, according to tanker-tracking and shipping data compiled by Bloomberg.
But the USA government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth. Energy Information Administration said on Wednesday.
Russian energy minister Alexander Novak on Wednesday warned of the impact of USA sanctions against Iran.
Iran's September exports are expected to plunge and "average as little as 1.5 million barrels a day in September according to the preliminary loading program, compared to around 2.8 million barrels a day of oil exports in April and May", Amrita Sen, chief oil analyst at Energy Aspects, said in a note to clients, carried by Bloomberg.
"This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day (bpd) of Iranian oil, will act".
Novak said global oil markets were "fragile" due to geopolitical risk and supply disruptions. Novak did not provide details.
A group of producers around OPEC and Russian Federation have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 percent since then and markets significantly tighter, there has been pressure on Russian Federation and OPEC to raise output.
Oil demand growth in 2019 is expected to rise by 250,000 bpd, a decrease from EIA's previous projection for an increase of 290,000 bpd.
The NOC has continued to function relatively normally amid chaos in Libya.
With Middle East crude markets also tightening, many Asian refiners are seeking alternative supplies, with South Korean and Japanese imports of USA crude hitting a record in September.
The Economic Times (ET), an Indian daily said Iran now exports about 2 million barrels a day which is already 28% less than what they used to export in April.
US oil producers are seeking new buyers for crude they used to sell to China before orders slowed because of the trade disputes between Washington and Beijing.