Oil prices surged to their highest levels in three weeks on Thursday amid worries that the ongoing impasse in the Iran conflict would continue to disrupt oil supply from the critical Middle East producing region. Brent crude futures for October delivery climbed by $1.20, or 1.3 percent, reaching $92.82 per barrel by 0813 GMT, while US West Texas Intermediate crude futures for September rose by 92 cents to $86.75 per barrel.
The more-active October WTI contract increased by $1.13, or 1.3 percent, to $85.52. Both Brent and WTI benchmarks hit their peak levels since late July during the trading session, marking a fifth consecutive gain after settling on Wednesday at their highest points since July 24. The September WTI contract is set to expire later on Thursday.
Analyst Giovanni Staunovo from UBS noted, “Tensions in the Middle East are still high, leading to potential supply disruptions. Decreased oil exports from the region are once again tightening the oil market.” The decision by the UAE to halt all financial and economic dealings with Iran until further notice has refocused attention on the strained relations between the major Gulf Arab oil producer and Iran.
Hiroyuki Kikukawa, the chief strategist of Nissan Securities Investment, commented, “Oil prices remain elevated due to sporadic incidents in the Middle East, although there is a lack of significant momentum without a major escalation.” He added, “The market is expected to see a gradual upward movement due to uncertainties surrounding peace negotiations and tensions involving the United Arab Emirates, Oman, and Iran.”
President Donald Trump mentioned on Tuesday that there were no ongoing discussions with Iran and confirmed that the Strait of Hormuz was open. Contrary to this, Iran stated that the waterway was still closed. Trump issued a warning on Wednesday about potential economic repercussions against any nation providing support to Iran.
Despite efforts to resolve the conflict, shipping traffic through the strait remained unchanged on Wednesday compared to the previous day, as talks to end the deadlock hit a standstill, as per the latest shipping data. Prior to the conflict that started with military actions on February 28, approximately one-fifth of global oil consumption passed through the waterway; however, current volumes are significantly lower than before the war.
The conflict has also impacted the supply of refined petroleum products, leading to reduced inventories and affecting refiners due to the limited availability of crude oil. The Energy Information Administration reported that US stockpiles of distillate fuel, which includes diesel and heating oil, declined for a third consecutive week, while crude inventories unexpectedly increased by 4.4 million barrels.