Oil prices advanced on Wednesday as tensions in the Middle East continued to raise concerns about regional supply disruptions, while industry data showed a larger-than-expected decline in US crude inventories.
At 05:28 ET (09:28 GMT), Brent crude futures gained 1.1% to $109.96 per barrel, while US West Texas Intermediate (WTI) futures rose 1.2% to $99.01 per barrel.
The increase followed renewed uncertainty surrounding the conflict involving Iran and the movement of oil shipments through the Strait of Hormuz, a major route for global energy exports.
According to a Financial Times report published on Wednesday, Israeli Prime Minister Benjamin Netanyahu has been seeking to resume large-scale military strikes against Iran. The newspaper reported that Netanyahu had instructed the Israeli military to prepare another offensive earlier in October, but the plans were not implemented after US President Donald Trump called for a suspension of attacks before the November US midterm elections.
Further military activity could affect oil shipments through the Strait of Hormuz, where maritime traffic has faced restrictions and security risks since the conflict began in February.
Oil prices briefly declined on Tuesday following unconfirmed reports that Qatar and Pakistan had proposed renewed negotiations to end the conflict. Brent fell from approximately $112 to $106 per barrel before recovering.
The subsequent increase followed reports of comments attributed to Iran’s president suggesting that the United States could launch further attacks if negotiations resumed.
Iranian media, citing the Islamic Revolutionary Guard Corps, also reported on Tuesday that another oil supertanker had caught fire in the Strait of Hormuz. The account added to reports of recent attacks affecting shipping in the area.
Continued fighting involving Saudi Arabia and Yemen’s Iran-backed Houthi movement has also contributed to uncertainty over regional oil transportation and supply.
“Oil prices have stayed relatively subdued given the supply risks. But as hostilities drag on, and as it’s no longer possible to draw on significant strategic reserves, there’s a danger that crude prices become unanchored,” said David Morrison, senior market analyst at Trade Nation.
Despite the security situation, oil exports from the Gulf have exceeded pre-war levels, according to Kpler shipping data cited by The Wall Street Journal. The newspaper attributed part of the continued shipping activity to US efforts to protect vessels travelling through the Strait of Hormuz.
However, the report also highlighted questions about the sustainability of these export volumes and the costs associated with providing security for oil shipments.
US Crude Inventories Fall by 4.93 Million Barrels
Separately, figures from the American Petroleum Institute (API) indicated that US crude oil inventories declined by 4.93 million barrels during the week ended 16 October.
The reduction was considerably larger than market expectations for a draw of 1.3 million barrels.
The latest figures followed two consecutive weeks of substantial inventory declines, with oil production along the US Gulf Coast affected by Hurricane Isaias.
The inventory data provided further indications of reduced available crude supplies in the United States, the world’s largest oil consumer.
Official inventory figures are scheduled for release later on Wednesday. Analysts expect the government data to show a decline of approximately 300,000 barrels.
API estimates and official government figures can differ because they are compiled using separate reporting methods and sources.
The recent inventory reductions have occurred while the US Strategic Petroleum Reserve remains at its lowest level in 44 years, following several months of emergency releases intended to address disruptions to global oil supplies.
The combination of geopolitical developments, shipping conditions in the Middle East and changes in US crude inventories remains central to the near-term outlook for oil markets.