Oil prices climbed on Wednesday as geopolitical tensions persisted across the Middle East, involving developments related to Iran, Saudi Arabia and Yemen’s Houthis. These tensions kept investors cautious amid growing concerns about potential disruptions to crude oil supplies from the region.
Prices received additional support from industry data indicating a sharp decline in US crude oil inventories, highlighting increasingly tight supply conditions in the world’s largest fuel consuming country.
Brent crude futures rose to $110.12 per barrel, while US West Texas Intermediate crude futures climbed to $98.99 per barrel.
On the geopolitical front, Israeli Prime Minister Benjamin Netanyahu moved to resume large scale strikes against Iran after previously instructing the military to prepare a new attack that was postponed at the request of the United States. Any renewed escalation involving Iran, which has disrupted shipping through the Strait of Hormuz, could intensify concerns about interruptions to Middle Eastern oil supplies, particularly following reports of a large oil tanker catching fire in the strait. Continued clashes and targeted attacks on oil infrastructure have also kept concerns about potential supply shortages elevated.
Regarding US supply and demand conditions, data from the American Petroleum Institute showed that crude oil inventories fell sharply by 4.93 million barrels last week, significantly exceeding market expectations for a decline of just 1.3 million barrels. This marked the third consecutive week of inventory drawdowns, partly reflecting disruptions to production in the Gulf of Mexico caused by Hurricane Isaias. Meanwhile, the US Strategic Petroleum Reserve has fallen to its lowest level in 44 years following emergency withdrawals aimed at addressing tight global oil supplies.
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