Oil prices near $90 as doubts over US-Iran deal grow
What's the story
Oil prices witnessed a surge on Wednesday morning, amid fears of supply disruptions in the Middle East. The increase was mainly driven by doubts over a potential US-Iran peace deal and attacks on shipping. Brent futures rose by 72 cents or 0.81% to $89.63 per barrel while US West Texas Intermediate (WTI) crude climbed by 71 cents or 0.85% to $83.91 per barrel at around 6:23 am IST today.
Tensions escalate
Iran threatens to close crucial shipping route
The US and Yemen's Iran-aligned Houthis reported separate attacks on shipping in the Strait of Hormuz and Bab el-Mandeb Strait on Tuesday.
Iran's top security official Mohsen Rezaei said the crucial Strait of Hormuz shipping route would remain closed unless the US accepted its conditions for ending the war.
These conditions include releasing frozen Iranian assets and ending other regional conflicts.
Impact assessment
Shipping traffic through Strait of Hormuz drops significantly
Shipping data revealed that traffic through the Strait of Hormuz fell to six vessels on Monday, significantly lower than its 10-day average of about 11.
Before the war, daily traffic through this vital waterway was between 125-140 vessels.
The drop in shipping traffic further emphasizes the growing concerns over potential supply disruptions in the Middle East.
Supply update
US crude inventories rise unexpectedly
A Reuters poll had predicted a decline in US crude oil and fuel inventories last week.
However, market sources citing American Petroleum Institute data said US crude inventories rose sharply for the week ending August 7.
Gasoline and distillate stocks fell during this period.
The unexpected rise in crude stocks could ease market concerns about potential supply tightness if confirmed by the US Energy Information Administration (EIA) report later today.
Future forecast
EIA warns of prolonged supply disruptions
The EIA has predicted that disruptions of about 600,000 barrels per day to Middle East crude oil supplies will continue through the end of 2027.
This long-term forecast highlights the potential for ongoing supply challenges in this key region, further influencing global oil prices and market dynamics.