Oil prices jumped more than 1 percent on Wednesday following reports of a potential strike on Iranian nuclear facilities, raising concerns that conflict could disrupt supply availability in the crucial Middle East producing region.
Brent crude futures for July rose by 97 cents, or 1.5 percent, to $66.35 a barrel by 03:30 GMT. It’s currently trading above $66.4 a barrel. U.S. West Texas Intermediate crude futures for July climbed by 96 cents, or 1.6 percent, to $62.99. The June WTI contract expired on Tuesday at $62.56 (now above $62.3).
“Such an escalation would not only put Iranian supply at risk, but also in large parts of the broader region,” Reuters reported, citing ING commodities strategists on Wednesday.
Iran is the third-largest producer among the members of the Organization of the Petroleum Exporting Countries, and an Israeli attack could disrupt flows from the country. There are also concerns that Iran could retaliate by blocking oil tanker flows through the Strait of Hormuz choke point in the Gulf, through which Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates export crude oil and fuel.
Read more: Crude oil prices hold above $65.4 amid strong Asian demand, U.S. economic uncertainties
Signs of improving U.S. crude supply
The U.S. and Iran have held several rounds of talks this year regarding Iran’s nuclear program, with U.S. President Donald Trump reviving a campaign of stronger sanctions on Iranian crude exports to compel them to abandon their nuclear ambitions. Despite these discussions, U.S. officials and the Iranian Supreme Leader Ayatollah Ali Khamenei made statements on Tuesday indicating that both sides remain far from a resolution. “There are indirect nuclear talks between the U.S. and Iran, which, if successful, could give the market further upside. However, these talks appear to be running out of steam,” said ING analysts.
Still, there were some signs of improving crude supply. U.S. crude oil stocks rose last week while gasoline and distillate inventories fell, according to market sources citing American Petroleum Institute figures on Tuesday. Crude stocks in the U.S., the world’s largest oil consumer, increased by 2.5 million barrels in the week ending May 16, the sources said on condition of anonymity.
Investors are looking ahead to government U.S. oil stock data from the Energy Information Administration later on Wednesday. Additionally, Kazakhstan’s oil production has risen by 2 percent in May, an industry source said on Tuesday, an increase that defies pressure from OPEC+ on the country to reduce its output.
