Oil prices rose to a three-week high after futures reached a key technical level, accelerating a rally fueled by U.S. President Donald Trump's hawkish rhetoric toward Russia as traders eyed supply disruptions from the OPEC+ member.

West Texas Intermediate crude rose as much as 2.3% to $64 a barrel after Trump said he believed NATO countries should shoot down Russian drones violating their airspace and struck a more sympathetic tone about Ukraine's chances of winning the war. He also reiterated the need for Europe to reduce its energy purchases from Moscow. The price rise deepened after prices surpassed their 100-day moving average of around $64.68.

Meanwhile, Russia is considering restricting diesel exports for some companies after a series of attacks by Ukrainian drones on its energy infrastructure, including pipeline facilities, which have put the country's supply chain in focus. Gasoil, a category that includes diesel, closed 2.4% higher in Europe on Tuesday, its biggest gain in three weeks, as diesel traders piled on bets on a surging diesel market.

"Oil prices remain supported as inventories in the OECD remain low, and it looks like the U.S. will have another large crude draw," said Giovanni Staunovo, an analyst at UBS Group AG. However, he added, higher OPEC+ crude exports so far in September remain a drag.

Oil prices were little changed this month as traders weighed the bearish fundamental outlook against lingering geopolitical tensions. On the supply side, Iraq is finalizing a deal to restart crude exports from its Kurdistan region after a two-year halt. That could bring about 230,000 barrels per day back into the international market, exacerbating a looming supply glut.

In the U.S., a government report showed crude inventories fell by 607,000 barrels last week to their lowest level since January. Product inventories also fell overall. This could add to the perception of a tighter supply landscape, as Ukraine continues to pound Russian energy infrastructure and seasonal refinery maintenance in the Northern Hemisphere puts pressure on global inventories.

Some market metrics are showing strengthening, with the WTI prompt spread—the difference between its two nearest contracts—at 61 cents per barrel in backwardation, nearly double from last week. Meanwhile, the difference between the two nearest December contracts widened to $1.72 per barrel from less than 70 cents two weeks ago. (alg)

Source: Bloomberg