Oil prices rose on Wednesday morning as uncertainty over a potential agreement between the United States and Iran, along with attacks targeting two vessels, heightened concerns about supply disruptions in the Middle East, despite industry data showing an increase in U.S. crude oil inventories.
Brent crude futures rose 75 cents, or 0.84%, to $89.66 a barrel by 05:53 GMT, while U.S. West Texas Intermediate (WTI) crude rose 72 cents, or 0.87%, to $83.92 a barrel. Both benchmarks had gained more than $1 earlier in the session.
Both crude benchmarks also rose by more than $1 at Tuesday’s settlement, reaching their highest closing levels since July 31. They extended their gains following a roughly 5% jump on Monday, as hopes for a deal between Washington and Tehran faded after U.S. President Donald Trump demanded that Iran compensate the United States for victims of previous wars, attacks and protests.
“The Middle East is increasingly becoming a battleground between ‘deal’ and ‘war,’ keeping oil prices swinging like a pendulum between $70 and $90 a barrel,” said Priyanka Sachdeva, head of market research at Phillip Nova in Singapore.
The United States and the Iran-aligned Yemeni Houthi group announced separate attacks on two vessels in the Strait of Hormuz and the Bab al-Mandab Strait on Tuesday.
Mohsen Rezaei, secretary-general of Iran’s Supreme National Security Council, said on Tuesday that the Strait of Hormuz would remain closed unless the United States accepted Tehran’s conditions for ending the war, including the release of frozen Iranian assets and an end to wars across the region, including in Lebanon and Gaza.
Trump said in an interview on Tuesday that some of the options available to him included “waiting” and allowing Tehran’s economy to collapse, or hitting it “very, very hard.”
Throughout the conflict, Trump has alternated between threatening escalation and saying that a peace deal was imminent.
However, Sachdeva said the uncertainty could prove profitable for some market participants.
“We may be entering a phase where markets simply adapt to the weekly swings in rhetoric… creating a highly volatile but opportunity-rich environment for day traders, short sellers and short-term investors,” she said.
Shipping data showed that vessel traffic through the Strait of Hormuz fell to its lowest level in eight weeks on Tuesday. Pre-war levels averaged between 125 and 140 vessels per day.
U.S. Inventories
On the supply side, a Reuters poll on Tuesday showed that U.S. crude oil and fuel inventories were expected to have declined last week.
However, market sources citing data from the American Petroleum Institute (API) said U.S. crude inventories rose sharply in the week ended August 7, while gasoline and distillate inventories declined.
According to the sources, crude oil inventories increased by about 9.1 million barrels, while gasoline and distillate inventories fell by 1.5 million barrels and 596,000 barrels, respectively, compared with the previous week.
Haitong Futures said in a note that the increase in crude inventories was far larger than expected. If confirmed by the U.S. Energy Information Administration (EIA) in its report later on Wednesday, the increase could ease market concerns about tight supplies.
Official figures from the EIA, the statistical arm of the U.S. Department of Energy, are scheduled to be released at 10:30 a.m. Eastern Time (14:30 GMT) on Wednesday.
In terms of longer-term supplies, the EIA expects roughly 600,000 barrels per day of Middle Eastern crude oil supplies to remain disrupted through the end of 2027.
Reuters
