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HOUSTON: Oil edged 1 percent higher after earlier hitting a six-month low on Wednesday, as a steeper-than-expected draw down in US crude stocks outweighed concerns over rising output, Russian exports and recession fears.

US crude stocks fell by 7.1 million barrels in the week to Aug. 12 to 425 million barrels, Energy Information Administration data showed, compared with analysts’ forecasts for a 275,000-barrel drop in a Reuters poll.

Brent crude rose $1.09, or 1.1 percent, to $93.45 per barrel by 12:23 p.m. ET (1723 GMT). Earlier in the day, recession worries had pushed the benchmark price to its lowest since February at $91.51. US West Texas Intermediate crude rose $1.39, or 1.6 percent, to $87.92 per barrel.

US crude exports hit 5 million barrels per day, the highest on record, according to EIA data, as WTI has traded at steep discount to Brent, making purchases of US crude ore attractive to foreign buyers. In a sign of strong demand, gasoline stocks also drew 4.6 million barrels, much higher than the expected 1.1 million barrel draw.

“It was expected to be a friendly report and it was pretty much across the board. Some of those demand destruction concerns that the market was going through seem to be alleviated a little bit,” said Phil Flynn, an analyst at Price Futures group.

The American Petroleum Institute on Tuesday had flagged a 448,000 barrel draw in crude stocks and 4.5 million barrels in gasoline inventories, according to sources.

Oil has soared in 2022, coming close to an all-time high of $147 in March after Russia’s invasion of Ukraine exacerbated supply concerns.

However, Russia has started to gradually increase its oil production after sanctions-related curbs and as Asian buyers have increased purchases, leading Moscow to increase its forecasts for output and exports until the end of 2025, an economy ministry document seen by Reuters showed.

Russia’s earning from exports

Russia’s earnings from energy exports are expected to rise 38 percent this year partly due to higher oil export volumes, according to the document, in a sign that supply from the country has not been impacted as much as markets originally expected.

The prospect of recession has also more recently weighed on oil prices. 

Political developments

On the oil supply front, the market is awaiting developments from talks to revive Iran’s 2015 nuclear deal with world powers, which could eventually lead to a boost in Iranian oil exports if a deal is reached.

The EU and US said on Tuesday they were studying Iran’s response to what the EU has called its “final” proposal to save the deal.

Analysts at Goldman Sachs said a return of Iranian crude supply would reduce their 2023 forecast by $5-10 per barrel from $125 per barrel.