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Oil Prices Hold Near Four-Week Highs Amid Middle East Tensions and US Stockpile Build
Summary
Crude oil benchmarks traded steady after recent gains as investors weighed the risk of supply disruptions from the U.S.-Iran conflict against a larger-than-expected increase in U.S. crude inventories.
Oil prices held steady in early trading on Thursday, hovering near their highest levels since late July, as the market balanced escalating geopolitical tensions in the Middle East against signs of weakening U.S. demand.
By 0037 GMT, Brent crude futures for October delivery were up 25 cents, or 0.3%, at $91.87 a barrel. U.S. West Texas Intermediate (WTI) crude for September delivery, which expires Thursday, edged down 2 cents to $85.81 a barrel, while the more active October WTI contract rose 14 cents to $84.53.
Geopolitical Risk Premium
The primary support for prices stems from heightened uncertainty surrounding the U.S.-Iran conflict and the security of the vital Strait of Hormuz shipping lane. According to a Reuters report, shipping traffic through the waterway has slowed as vessel owners await clear signals on its reopening following a blockade.
Adding to regional instability, the United Arab Emirates suspended all financial and economic transactions with Iran. "Oil prices remained elevated as the market is supported by sporadic attacks in the Middle East but lacks fresh momentum without a major escalation," said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, in a note cited by Reuters.
US Inventories Rise
AdCountering the supply-side concerns, the latest data from the U.S. Energy Information Administration (EIA) pointed to softer demand. The EIA reported on Wednesday that U.S. crude inventories unexpectedly rose last week.
Key figures from the EIA report include:
- U.S. crude stockpiles increased by 4.4 million barrels for the week ending August 14.
- This was in stark contrast to analyst estimates for a 600,000-barrel draw.
- Gasoline inventories also rose, while distillate stockpiles fell.
This bearish inventory data has so far been overshadowed by the significant geopolitical risk premium being priced into the market, keeping crude benchmarks near the four-week highs they reached in the previous session.
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