International oil prices climbed on Wednesday as growing uncertainty over a potential peace agreement between the United States and Iran, coupled with attacks on two commercial vessels, sparked widespread concern over potential disruptions to crude supplies from the Middle East. However, industry data showing a substantial increase in US crude inventories tempered the price gains.
At 1:53 pm Beijing time, Brent crude futures were up 75 cents, or 0.84%, to $89.66 per barrel, while US West Texas Intermediate (WTI) crude futures rose 72 cents, or 0.87%, to $83.92 per barrel. Both benchmark contracts briefly surged over $1 earlier in the session. The gains follow a rise of more than $1 for both contracts on Tuesday, when they closed at their highest levels since July 31. On Monday, oil prices had surged roughly 5% after President Donald Trump made new demands for compensation related to victims of wars, attacks, and protests, significantly dimming the outlook for a US-Iran peace deal and directly pushing prices higher.
"The situation in the Middle East constantly swings between 'an agreement being reached' and 'the outbreak of war,' and oil prices have been oscillating like a pendulum in a range of $70 to $90 per barrel," said Priyanka Sachdeva, head of market insights at Singapore-based Phillip Nova.
On Tuesday, the United States and Yemen's Iran-backed Houthi group both reported attacks on shipping vessels in the areas of the Strait of Hormuz and the Bab el-Mandeb strait. Iran's top security official, Mohsen Rezaei, stated that the crucial Strait of Hormuz would remain blocked unless the US accepts Iran's ceasefire conditions, which include unfreezing Iran's overseas assets and ending other regional conflicts. In a Tuesday interview, Trump discussed his strategy toward Iran, saying the US would either let the current stalemate continue or deliver a very severe blow. Throughout the conflict, Trump's stance has been inconsistent, alternating between threatening to escalate and claiming a peace deal is imminent.
Sachdeva added that this high level of uncertainty can create profitable opportunities for some traders. "The market might be entering a new phase where it becomes accustomed to the weekly reversals in the narrative. This environment is volatile but offers numerous trading opportunities for day traders, scalpers, and short-term speculators."
Shipping data showed that the number of vessels passing through the Strait of Hormuz on Tuesday fell to a one-week low of just eight, compared to the pre-conflict daily average of 125 to 140 ships through this critical waterway.
On the supply front, a market survey conducted by media outlets on Tuesday had initially anticipated a likely decline in US crude and product stockpiles last week. However, market sources citing data from the American Petroleum Institute (API) reported that US crude inventories rose substantially for the week ending August 7, while gasoline and distillate stocks declined. Sources reported that crude inventories increased by approximately 9.1 million barrels week-on-week, while gasoline inventories fell by 1.5 million barrels and distillate inventories dropped by 596,000 barrels.
A research note from Haitong Futures commented that the crude inventory build far exceeded market expectations. If confirmed by the official data from the US Energy Information Administration (EIA) on Wednesday evening, it would help alleviate anxiety about tight crude supply. The EIA's official inventory data, the statistical arm of the US Department of Energy, is scheduled for release at 10:30 am Eastern Time (14:30 GMT).
Looking at the longer-term supply outlook, the EIA forecasts that a disruption of roughly 600,000 barrels per day in Middle Eastern crude supply could persist until the end of 2027.
Comments