Picking up where they left off last week, crude oil futures rallied again Wednesday, lifted by another round of bullish inventory data set against a backdrop of simmering U.S.-Iran tensions.

August New York Mercantile Exchange (Nymex) West Texas Intermediate futures surged $1.55 to settle at $59.38/bbl Wednesday, up nearly $10/bbl from prices in the low $50s earlier this month. The gains come as recent Energy Information Administration (EIA) inventory data and rising concerns over a supply disruption at the Strait of Hormuz have overshadowed fears of trade conflicts slowing the global economy and eating into demand.

The EIA on Wednesday reported a draw from U.S. commercial crude oil inventories of 12.8 million bbl for the week ending June 21, the second draw in as many weeks. The hefty pull occurred as U.S. demand edged higher, with the four-week average the highest since 2007, according to Kyle Cooper of ION Advisors.

“While the huge crude draw of 12.8 million bbl might lead one to think the EIA ”lost’ crude barrels, that is actually incorrect,” Cooper said. “With the plunge in crude imports and lower U.S. oil production and record crude exports and higher crude runs, the crude components implied a draw of 15.4 million bbl with the historical adjustment factor.

“Thus the EIA ”found’ 2.6 million bbl compared to the 3 million bbl ”found’ last week. The headlines were much more bullish than total inventories, with total petroleum inventories falling ”only’ 11.9 million bbl…Gasoline and distillate exports both surged, and this contributed to the gasoline and distillate draws. This was a very bullish report overall.”

While the EIA data undoubtedly played a major role in the recent rally, other developments that have occurred over the past week or so could mean the recent surge has some staying power. Prior to last week, the market largely discounted the potential impact of supply disruptions in the Persian Gulf, focusing instead on a long list of bearish market drivers, according to EBW Analytics Group. “Last week’s developments fundamentally changed the picture.”

Two developments were particularly significant, according to EBW. First, the attack on two oil tankers in the Gulf of Oman and President Trump’s threats to launch a retaliatory attack on Iran shattered the market’s complacence regarding the potential for major supply disruptions in the Gulf. Immediately on the heels of the assault on the oil tankers, the string of massive crude builds was finally broken.

Other developments were also constructive, and concerns regarding major supply disruptions are likely to persist, according to EBW. This has become evident as Nymex crude held its ground even after President Trump called off potential air strikes against Iran, suggesting that the supply disruption premium built into the market last week is not likely to evaporate quickly, and instead is likely to bolster prices on an ongoing basis.

“This is likely to be particularly true over the next 30-60 days, when refinery crude utilization is likely to be at its peak for the year, and a major supply disruption could quickly drive up prices in the physical delivery market to new highs for the year,” EBW said.

Last Thursday (June 20), news reports that Iran shot down a U.S. military drone sent crude prices soaring, another in a series of developments that have seen tensions between the two countries escalate, observed Drillinginfo analysts.

“The tensions that started increasing between the U.S. and Iran due to the U.S.’s withdrawal from the 2015 Iran nuclear agreement and reimposition of oil sanctions have been getting worse, with the U.S. accusing Iran of the tanker attacks in the Strait of Hormuz,” the analysts said. “The drone attack and President Trump’s comments exacerbated the tensions between the countries, and the risk of instability in the Middle East will continue to be a bullish factor supporting prices.

“Also supporting prices was the weaker dollar, expectations that the U.S. Federal Reserve may cut interest rates,” and an upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) scheduled for early next week that could see supply cuts extended into the second half of this year.

Still, Drillinginfo analysts see concerns over slowing global economic activity and the potential impact on crude demand continuing to pressure prices. “The market is awaiting the outcome of the potential meeting between President Trump and Chinese President Xi Jinping on the U.S.-China trade wars” at the G20 Summit takes place in Osaka, Japan, talks that were to begin Friday.

“The next couple of weeks will be critical for crude prices, as the G20 meeting and OPEC meeting will occur within a week of each other. A failure to reach an agreement with China will further dampen the economic and demand growth, pressuring prices further; meanwhile, a supply cut extension by OPEC will support prices on the supply side.”

Also making headlines this week were reports that the Philadelphia Energy Solutions refinery will shutter in the aftermath of a massive explosion at the facility earlier this month. The refinery has been the largest oil refining complex on the East Coast, capable of processing around 335,000 b/d of crude, according to the company.

Philadelphia Mayor Jim Kenney confirmed Wednesday that the company plans to shut down the refinery within the next month. “I’m extremely disappointed for the more than 1,000 workers who will be immediately impacted by this closure, as well as other businesses that are dependent on the refinery operations,” he said.

Nymex July RBOB gasoline futures surged nearly a dime Wednesday to settle at $1.9704/gal.