Oil Settles Higher
Oil narrowly held onto a three-day winning streak as the US launched fresh strikes on Iran in response to a spate of attacks on shipping vessels and American diesel stockpiles posted a sizeable increase.
West Texas Intermediate rose 0.3% to settle at $79.60 a barrel, the highest in a month, after surging nearly 11% in the previous two sessions. US President Donald Trump pledged to intensify the bombardment of Iran until Tehran stops attacking ships in the Strait of Hormuz and agrees to open the critical energy chokepoint. Washington launched a fresh wave of airstrikes later Wednesday, marking the fifth straight day of US attacks.
Prices extended gains after settlement as the Wall Street Journal reported that Trump is leaning toward expanding US military operations in Iran and discussed the seizure of Kharg Island, home to Iran's main oil export terminal.
Capping upside, US oil inventory data published Wednesday by the Energy Information Administration showed a notable increase in distillate stockpiles as demand weakened, while overall oil exports rose but stayed below recent prewar averages of about 4 million barrels a day. Traders are set to hone in on these figures in coming weeks as strikes between the US and Iran increase demand for US barrels to offset renewed disruptions to Middle Eastern flows.
"A massive drop in implied demand for distillates, in combination with strong refinery runs, encouraged a large inventory build," said Matt Smith, Americas lead oil analyst at market intelligence firm Kpler. "Ongoing strength in refining activity amid peak summer driving demand has encouraged a draw to crude inventories, although its magnitude has been stymied by ongoing SPR releases and a slowing pace of crude exports," he added, referring to the Strategic Petroleum Reserve.
Oil has soared in recent days amid the renewed fighting in the region, including attacks on crude-laden vessels and Gulf nations including Kuwait. Prices have climbed to their highest in about a month, recouping part of a roughly 30% second-quarter decline, as the escalating conflict revives concerns over supplies from the energy-rich region.
Iran shows little sign of backing down. On Wednesday, the Islamic Revolutionary Guard Corps said the strait will remain closed until the US ends its strikes and the blockade of Iranian ports. Iran's Mohammad Bagher Ghalibaf said the country was prepared to defend itself, but remained committed to using diplomacy to safegaurd its national security. Meanwhile, the US, Israel and Lebanon appeared to be moving toward expanded technical talks.
US Vice President JD Vance is rallying Congressional Republicans to move forward with a plan to ramp up spending on the conflict. Any attempt to seize Iran's Kharg Island would require ground troops, military analysts have warned. The Wall Street Journal said a final decision from Trump has not been made and remains reluctant to commit ground troops.
Earlier in the week, traders focused on attacks on ships that had been participating in so-called shuttle runs that have helped get oil from inside the Persian Gulf through the strait. Visible transit through the waterway has fallen sharply in recent days, but there remains a high level of uncertainty about what's actually crossing because many ships have been doing so dark -- without broadcasting their location.
The International Maritime Organization warned on Wednesday that it's too dangerous to cross at the moment.
"While crude has started to find some balance after rallying from around $70, it still takes a brave shipowner to transit the Strait of Hormuz with the threat of attacks from forces aligned with Tehran remaining very real," said Chris Weston, head of research at Pepperstone Group Ltd. "The broader geopolitical backdrop continues to deteriorate, providing ongoing support for crude prices and keeping buyers prepared to step back in should prices push toward the $90 area."
The US said it helped an unspecified double-digit number of ships cross the Strait of Hormuz Tuesday night, a sign that some vessels have been able to pass even as Iran has made clear its willingness to attack.
Oil Prices
WTI for August delivery edged up by 0.3% to settle at $79.60 a barrel in New York.
Brent for September settlement rose 0.3% to settle at $84.95 a barrel.
What do you think? We’d love to hear from you, join the conversation on the
Rigzone Energy Network.
The Rigzone Energy Network is a new social experience created for you and all energy professionals to Speak Up about our industry, share knowledge, connect with peers and industry insiders and engage in a professional community that will empower your career in energy.