Traders following the trend line pushed the price of oil close to $70 per barrel early Wednesday following signs of a massive drain on U.S. oil inventories.

Crude oil prices rallied strongly in the previous session after a federal U.S. report showed strong oil production was balanced by a surge in the consumption of consumer fuels, with the expectations of a 9.3 million barrel per day thirst for gasoline on pace to be the highest level in two years.

The rally started off the year on the back of a geopolitical risk premium fueled by protests in Iran. On Friday, U.S. President Donald Trump is widely expected to deny a waiver on oil-related sanctions under the terms of the U.N.-led nuclear agreement, a decision that could shelve millions of barrels of Iranian oil on the European market.

Late Tuesday, the American Petroleum Institute reported total U.S. crude oil inventories dropped a whopping 11.19 million barrels, blowing past the paltry 3.5 million barrel draw expected from commodity pricing group S&P Global Platts.

With the gap between supply and demand getting thinner and thinner, there is no room for risk. Joe McMonigle, a senior energy analyst at Hedgeye Risk Management, told UPI the question of the sanctions waiver explains some of the sustained rally.

"There is also a bit of herd mentality joining the rally on the success of fourth quarter crude draws and price rise," he said.

Ole Hanson, the head of commodity strategy at Saxo Bank, told UPI momentum is carrying the narrative.

"Don't fight the trend," he said.

The price for Brent crude oil, the global benchmark for the price of oil, was up 0.41 percent as of 9:16 a.m. EST to $69.10 per barrel. West Texas Intermediate, the U.S. benchmark, was up 0.67 percent to $63.38 per barrel.

Brent crude oil prices are up 7 percent from Dec. 1 and 40 percent, or nearly $20 per barrel, more than the first week in July. That's led to concerns about a sharp correction, driven in part by the response from U.S. shale oil producers.

In a short-term market report, the U.S. Energy Information Administration said it expects total U.S. crude oil production to increase by almost 1 million barrels per day this year and easily break all-time records with an expected average output above 10 million barrels per day.

McMonigle said production lines are pointing to signs of a surplus and a "significant correction" could be in store, though Trump's decision on sanctions remains a price factor. Hanson added that traders are clearly not focused on potential negative news.

The EIA releases formal data on oil and gasoline supplies later in the day.

"Today's EIA report has to beat estimates in order for the API driven rally to be maintained," Hanson said.

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